Should you invest in disruptive materials?

Should you invest in disruptive materials?

New technologies are having a transformative impact on the transportation and energy sectors. As these technologies evolve, it is becoming clear that a small selection of materials, metals, and minerals—known collectively as disruptive materials—are critical components necessary for innovation.

This chart from Global X ETFs takes a closer look at the disruptive materials that are key to fueling climate technology. With increasing global decarbonization efforts, destructive materials may enter a demand supercycle characterized by a structural period of decades of rising demand and rising prices.

Building blocks of the future

There are 10 categories of disruptive materials in particular that are expected to see an increase in demand as part of their role in emerging technologies.

Destructive material Applicability
Zinc Protects metal surfaces from rust through a process called galvanization. This is essential for wind power.
Palladium and platinum It is often used in catalytic converters, thus playing a major role in hydrogen fuel cell technology.
nickel A corrosion-resistant metal used to make other metals more durable.
Manganese An important mineral needed for the production of batteries and steel.
lithium The main component of lithium-ion batteries.
Graphene The thinnest material known, which is also 100 times stronger than steel. It is used in sensors and transistors.
Rare earth materials A broader category including 15 elements of the lanthanide series, plus yttrium. These metals are found in all types of electronics.
Med A reliable conductor of electricity. It can also kill bacteria, making it useful during pandemics.
Cobalt An important ingredient for rechargeable lithium batteries, found only in certain regions of the world.
Carbon fibers and carbon materials Strong and lightweight materials with applications in the aerospace and automotive industries.

While these 10 categories do not make up the entire destructive material universe, they are all essential to ensuring a climate and technologically advanced future.

How the Green Revolution is transforming the materials market

The data on rising global temperatures and extreme weather events are staggering and prompting governments and organizations around the world to increase their efforts to combat their effects through new budgets and policies.

Take for example the increasing total number of climate disasters in the US. As recently as 2021, the number of weather disasters was 20, while in 1980 it was much less than three. In addition, total disaster costs have risen over 100 billion dollars per year.

Globally, the top 10 most extreme weather events of 2021 have been rounded up 170 billion dollars in costs.

Rank Climatic event Price (US$ billion)
#1 Hurricane Ida $65.0 billion
#2 European floods $43.0 billion
#3 Texas winter storm $23.0 billion
#4 Floods in Henan $17.6 billion
#5 Flooding in British Columbia 7.5 billion dollars
#6 The “cold wave” of France 5.6 billion dollars
#7 Cyclone Yas $3.0 billion
#8 Australian floods 2.1 billion dollars
#9 Typhoon In-fa $2.0 billion
#10 Cyclone Tauktae 1.5 billion dollars

What’s more, some studies estimate that these rising costs are far from stopping. By 2050, the annual cost of weather disasters may exceed 1 trillion dollars annually. In an effort to slow rising temperatures, governments are dramatically increasing their climate spending. For example, the US will spend $80 billion a year over the next five years.

To see how climate costs affect the materials market, consider the complexity behind a typical solar panel, which requires nearly 20 various materials, including copper for wiring, boron and phosphorus for semiconductors, and zinc and magnesium for its frame.

Overall, these materials are essential to the expansion of various emerging technologies such as lithium batteries, solar panels, wind turbines, fuel cells, robotics and 3D printers. And therefore translate into higher levels of demand for the destructive materials that make the fight against climate change possible.

Disruptive material growth expected until 2040

A societal shift in how we deal with climate change is predicted to trigger a supercycle of demand for destructive materials and act as a huge tailwind.

But how big is this expected level of demand? To answer this question, we use two scenarios created by the International Energy Agency (IEA). The first one is Scenario of announced policiesa more conservative model that assumes material demand will double by 2040 from 2020 levels. This scenario assumes that society takes climate action in line with current and existing policies and commitments.

Then there is Scenario for sustainable development, suggesting that more drastic action will be taken to transform global energy consumption and meet international climate goals. In this scenario, the demand for destructive materials could grow to that much 300% compared to 2020 levels.

In both scenarios, however, there is still significant demand for each type of material.

Destructive material The indicated policies Scenario Demand in relation to 2020 Search for a sustainable development scenario towards 2020
lithium 13X 42X
Graphite 8X 25X
Cobalt 6X 21X
nickel 7X 19X
Manganese 3X 8X
Rare earth elements 3X 7X
Med 2X 3X

Overall, lithium is expected to see the largest spike in demand, as it could reach 13 to 42 times the level of demand seen in 2020, based on the above scenarios.

Introducing the Global X Disruptive Materials ETF

The Global X Disruptive Materials ETF (Ticker: DMAT) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Disruptive Materials Index.

Investors can use this passively managed solution to gain exposure to the growing demand for disruptive materials and climate technologies.

The Global X Disruptive Materials ETF is a passively managed solution that can be used to gain exposure to the growing demand for disruptive materials. Click the link to learn more.

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