According to Bloomberg New Energy Finance (BNEF), the green transition could require up to $173 trillion in investment in infrastructure and energy supply actions over the next three decades. The ecological transition has a massive focus on four key components. These key components are solar panels, wind turbines, electric vehicle charging stations, and lithium-ion batteries. And all this investment in shares could generate great benefits if we know where to position ourselves...
Wind turbines️
Although some materials such as fiberglass-reinforced plastic are used in wind turbines, most are made from concrete, steel, or both. And demand for these two materials only grows as wind turbines get taller and bigger, some reaching heights similar to those of skyscrapers.
The size of these wind turbines is what makes the materials market for them more regional in nature. That is, a developer building a wind farm in China will likely import concrete and steel domestically. That is why it is important to examine the wind market growth forecasts by region before examining the various steel and concrete producers.
The key ingredient in concrete is cement, which is then mixed with water and other compounds such as sand and gravel. Most of it comes from the world's largest cement producer, Holcim (HOLN), which generates about 30% of its revenue from each of the three major regions. As for steel producers, the best companies to make our investment in stocks from Asia, Europe and North America are Nippon Steel (5401) ArcelorMittal (MTS) and Nucor (NUE), respectively. But a warning: investing in cement and steel producer stocks exposes us to the ups and downs of the construction industry in general, so these stocks are far from a pure investment in wind industry stocks.
Solar panels☀️
The three main materials used in solar panels are steel (which we have already talked about), aluminum and polysilicon.
The world's largest aluminum producers are based in China (Chalco/601600 y Hongqiao/1378) and Russia (Rusal/RUAL). Other major producers are American companies Alcoa(AA), Kaiser Aluminum (KALU) and Century Aluminum (CENX), as well as the French Constellium (CSTM).
The world's largest polysilicon producers are also based in China (no wonder the country dominates the global solar industry). Some of the greats are Tongwei (SSE:600438), GCL-Poly Energy (OTC:GCPEF), Daqo New Energy (NYSE:DQ) and Xinte Energy (HKEX:1799). Outside of China, there is the German Wacker chemie (XETR:WCH) and the South Korean LEISURE (KRX:010060). We just have to keep one thing in mind. Apart from Daqo New Energy, none of the other companies produce only polysilicon, which means that if we make our investment in stocks in this sector we are investing in the potential (and potential risks) of a variety of other materials.
Electric vehicle chargers
Copper's durability and excellent electrical conductivity make copper the metal of choice for electric vehicle charging stations, which are growing proportionally to the number of electric vehicles in circulation. Furthermore, electric vehicles themselves contain three to five times more copper than a conventional vehicle.
Exposure to copper can be gained by investing in shares of copper mining companies such as Freeport-McMoRan (NYSE:FCX), Southern Copper Corporation (NYSE:SCCO) or First Quantum Minerals (TSX:FM). Another way to make our investment in stocks more diversified would be through ETFs that follow the price of copper, being WisdomTree Copper (MIL:CUP) and United States Copper Index Fund (AMEX:CPER) two of the most important.
Lithium ion batteries
In addition to copper and aluminum, lithium-ion batteries contain a lot of nickel and (yes, you guessed it) lithium. In fact, according to BNEF, investment in lithium and nickel stocks by the battery sector will at least quintuple by 2030.
About 75% of global lithium production is controlled by only five companies, each of which is listed on the stock exchange, which allows us to take advantage of it to make an investment in shares. We can make our investment in lithium stocks with Albemarle (NYSE:ALB), SQM (NYSE:SQM), Ganfeng lithium (SZSE:002460), tianqi (SZSE:002466) and Livent (NYSE:LTHM). On the other hand, practically all these values are in the hands of the Global X Lithium & Battery Tech ETF (AMEX:LIT), which makes a diversified equity investment in stocks focused on lithium and batteries.
Like lithium, the supply of nickel for batteries is concentrated, with seven companies representing more than 80% of the supply.
These seven companies are listed on the stock market and it is worth noting that the largest of them, the Russian Norilsk Nickel, has an ambitious strategy to increase production by 17% by the end of the decade. But there is the same trap we have exposed in previous cases: neither company produces only nickel, which means you are investing in the potential (and potential risks) of a variety of other metals. For example, Nornickel, which despite what its name might lead us to believe, actually only generated 20% of its revenue from its nickel operations last year.