Investing In Rare Metals

We are living through a technological revolution, in which rare metals are playing a pivotal role.

As our economies become defined by the guiding principles of digitalisation and decarbonisation, there is one theme that all aspects of progress have in common: The more advanced a technology becomes, the more numerous and specific are its requirements in terms of rare metals.

Our demand for metals is fractalising: In less than 50 years, we have gone from using just 12 or so metallic elements in a limited range of uses, to being dependent on more than 80 metals across a plethora of applications.

And yet despite escalating demand for the elements that form our investment universe, they are extremely rare; some of them a hundred million times more so than aluminium.

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Traditional tangible assets

Tangible assets such as precious metals, artworks, and luxury products have traditionally been perceived as a protection against bankruptcy and default. However, attitudes are changing. Values for these asset classes tend to be heavily affected by speculation as well as by laws of supply and demand, and not all have a level of usefulness conferring on them true resilience to systemic risk.

Rare Metals

We’ve been using rare metals for less than a century, but today they are critical components of the global economy. They are non-perishable, easy to store, and have real value deriving from their production cost and tech applications.

Furthermore, the value of rare metals is determined by industry-specific instances of supply and demand which are unique to each metal and decorrelated from other market trends. As such, these assets represent tremendous diversification potential for any investor.

The numbers given in this video are estimates only, and are not intended accurately to represent current prices and production volumes.

Base metals such as copper and nickel, and precious metals such as platinum, are directly targeted by mining companies and produced as a primary product, whereas rare metals such as tellurium, cobalt or ruthenium are – for the most part – produced as by-products of the base and precious metals industries. As such, they have a low price elasticity of supply.

The by-product nature of the metals in our investment universe, together with rapidly evolving industrial needs, can lead to serious shortages and significant, rapid price movements.

If a rare metal’s specific physical properties make it critical for a given application, then avoiding it would necessarily lead to huge efficiency losses, or even to the complete inability to produce that particular technology. Industrial players therefore cannot usually afford to substitute critical rare metals in the short term, meaning that the latter have a low price elasticity of demand.

Below are three instances of physical properties exploited in rare metals. This is by no means an exhaustive list. Ruthenium for example is used not just as a semiconductor in microelectronics, but also as a catalyst in the oil industry, as an anti-corrosion agent in hard drives, and in strengthening titanium alloys… and further applications are constantly being developed for this terrifically versatile metal.