Critical Metals: Powering Clean Energy, Technology and Global Security

The U.S. Department of Energy identifies 50 critical minerals vital to energy production, storage, and conservation. Among them, lithium, cobalt, graphite, and rare earth elements are essential for electric vehicles, wind turbines, solar panels, and high-tech semiconductors. The numbers highlight the risk: the U.S. imports over 50% of its annual consumption of 29 minerals and relies 100% on foreign sources for 12, including graphite.¹ China, in particular, has previously leveraged export restrictions as a political tool, as seen with rare earths in 2019²  and gallium/germanium in 2023.³ This isn’t just a sourcing challenge; it’s a strategic vulnerability. For investors, this supply-demand imbalance creates a structural case for long-term growth in the sector.

Governments are not standing still. In the U.S., policymakers are putting billions of dollars behind reshoring and diversifying supply chains. To address these risks, U.S. policymakers have enacted significant legislation:

• Inflation Reduction Act: (IRAAllocates $392 billion for clean energy initiatives, including EV tax credits tied to U.S. or allied sourcing of battery components.¹

• CHIPS and Science Act: Provides $280 billion to boost domestic semiconductor manufacturing, reliant on critical inputs such as gallium, germanium, and rare earths.²

• Bipartisan Infrastructure Law (BIL): Supports workforce training and supply chain buildout for mining and processing infrastructure.

Partnerships such as the U.S.-Japan Agreement³ and the Mineral Resource Partnership (MRP)⁴

further diversify supply chains beyond China, reinforcing the sector’s strategic importance.¹

The critical minerals market has doubled to $320 billion in just five years and is set to double again by 2030.¹ The World Bank projects demand for graphite, cobalt, and lithium to surge by nearly 500% by 2050 to meet net-zero goals.² Companies involved in mining, processing, and supply chain integration stand to benefit, with governments exploring the creation of critical mineral reserves akin to strategic oil stockpiles. Original equipment manufacturers (OEMs) are also vertically integrating into mining and processing, enhancing resilience and investment appeal.¹

The Growing Importance of Critical Metals Creates Significant and Strategic Opportunities for ETF Providers to Innovate and Capture Emerging Market Trends:

• Critical Minerals Mining ETFs: Exposure to companies mining lithium, cobalt, nickel, and rare earths.

• Clean Energy Supply Chain ETFs: Funds capturing the full EV and renewable energy ecosystem.

• Geopolitically Diversified ETFs: Targeting producers in allied markets like Canada and Australia to mitigate China-related risks. 

• Thematic Technology ETFs: Combining critical metals exposure with semiconductor and clean tech firms.

These products not only align with global policy objectives but also offer investors exposure to long-term megatrends in energy and technology.

The Indxx Global Critical Metals Index captures companies directly involved in mining high-risk, supply-disruption metals. Its rules-based methodology ensures diversification through constituent caps and annual rebalancing, while maintaining a sharp focus on firms generating revenue from critical minerals. This provides a transparent, forward-looking benchmark for investors seeking targeted exposure to one of the fastest-growing areas of the global economy.

Despite the significant opportunities in this sector, investors should remain fully aware of the wide range of associated risks that could materially impact overall performance:

• Regulatory delays: Mining projects often face slow approvals due to complex permitting and compliance rules, increasing costs and uncertainty.

• Commodity price volatility: Fluctuations in global demand and supply bottlenecks can lead to unstable prices, affecting project profitability.

• Geopolitical risks: Tensions like those between the U.S. and China can trigger trade restrictions and disrupt supply chains, leading to market instability.

Nonetheless, adopting a well-structured diversification strategy across multiple companies, sectors, and geographies can help mitigate these risks.

Critical metals have moved from niche to necessity. They are now the backbone of clean energy, semiconductor innovation, and national defense. With powerful policy support, rapid demand growth, and rising strategic importance, the sector offers long-term opportunities for investors. For ETF providers, this is a chance to align products with megatrends driving the future of energy, technology, and global trade.