Scouring the globe for green and rare metals
The Wisdom Tree Energy Transition and Rare Earth Miners Ucits ETF (RARE) offers a broad global perspective on “green metals.”
Some of the most well-known “green metals” such as nickel and lithium have dropped 70% or 80% from their peak, but the Energy Transition Metals Value Chain (ETMVC) and includes companies mining aluminium, cobalt, copper, iridium, platinum, silver, tin, zinc and Rare Earth Metals (REE). (The 17 rare earth elements in the periodic table are lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), promethium (Pm), samarium (Sm), europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb), lutetium (Lu), scandium (Sc), and yttrium (Y).)
Rare earths demand is expected to double by 2030, and there are fears of shortages since in December 2023, China banned the export of some rare earth elements and processing technologies.
Energy transition metals are not just about electrification and batteries. Themes underlying the WisdomTree Energy Transition Metals and Rare Earth Miners Index (WTMRARE), developed with Wood Mackenzie, include electric vehicles, transmission, charging, energy storage, solar, wind, and hydrogen.
Whereas market cap weighted indices are by definition dominated by mega caps and large caps, but WMTRARE has 63% in mid-caps (USD 2-10 billion) and 15% in small caps (below USD 2 billion).
Many indices are dominated by US equities, which make up over half of global market cap, but WMTRARE is much more diverse, with only 21% in the US. It has 15% in China, 15% in Australia, and between 3% and 5% in Norway, South Korea, South Africa, Japan and Canada.
The top ten holdings include aluminium makers Alumina and Norsk Hydro, base metals miner Boliden, and South African platinum miner Northam Platinum – as well as a more surprising name, water treatment firm Ecolab Inc.
Elsewhere in the metals ETFs universe, VanEck also has a rare earth and strategic metals ETF, VanEck Rare Earth and Strategic Metals UCITS ETF, which is based on a different index: the Market Vectors MVIS Global Rare Earth/Strategic Metals Index. A quick scan of the top ten holdings shows that Australia’s rare earth miners Lynas Rare Earths and MP Materials, and its lithium and tantalite producer Pilbara Minerals, are the only three also present in the top ten of the WisdomTree product. This makes a refreshing change from tech and AI ETFs dominated by MAG7. The metals space spans the globe and investors need to be in five continents to get diversified exposure.