The global commodity strategy team at BofA Securities has identified 27 raw materials they group under the acronym MIFT – metals important for future technology – that are vital for the rise of renewable power, and should see significant price increases as demand climbs.
The list of metals goes well beyond copper, lithium and cobalt which investors usually associate with de-carbonization. The strategist notes that electric vehicle batteries alone require 10 metal inputs: copper, graphite, silicon, titanium, aluminum, niobium, cobalt, lithium, manganese and nickel.
The full list (which I posted on social media here, along with the specific renewable sectors that create demand) also includes boron - used for wind and solar power and also for electric motors - molybdenum (wind, solar, electric vehicles, carbon capture and LED lighting) along with lead and zinc. Cadmium, gallium, germanium, selenium, and tellurium - all inputs for photovoltaic solar power - are also featured.
The strategists forecast extremely strong growth in a number of materials to 2030. Nickel demand, for example, is expected to see a 60 per cent jump in demand relative to current levels and cobalt will see an even more impressive 215 per cent increase. Lithium is forecast to see the biggest surge – BofA predicts a 492 per cent expansion in demand in the next eight years.
The predicted growth in platinum demand is also impressive at 40 per cent. A rise in hydrogen power generation above current forecasts could drive platinum usage even higher than expected. The precious metal is used in electrolysers that are used to produce hydrogen.
For investors, profiting from MIFT demand is less straightforward than just buying any producer of any of the materials. For lithium, for instance, BofA analyst Matthew DeYoe only recently raised his rating on lithium producers Albemarle Corp. and Livent Corp. from “underperform” to “neutral.”
Previously, he believed the stock prices had rallied well above earnings potential but now both stocks are more than 20 per cent lower than their recent highs. Mr. DeYoe is also concerned about future lithium supply outpacing demand, a trend that would put downward pressure on the commodity price.
The MIFT theme provides ample motivation for further research and investors can wait for promising opportunities as the trend plays out in the coming years.
-- Scott Barlow, Globe and Mail market strategist
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Compiled by Globe Investor Staff