'Long-term growth opportunities for Lundin Mining'
"In aluminium we value Norsk Hydro, a leader in Europe with an integrated business, in lithium Albemarle due to growth in demand."
Key points
Daniel Lurch, manager of the Jss Sustainable Equity - Strategic Materials focuses on the impact of commodities and strategic materials within an otherwise well-diversified portfolio.
In recent years, strong volatility has characterised the performance of commodities such as gold, silver and copper. What should we expect especially in light of the new conflict in the Middle East?
The rise of gold and silver since 2025 stems from their status as safe haven assets in a fragmented global landscape. Emerging market central banks are increasing gold reserves to diversify. The current de-dollarisation is fuelled by fears of currency devaluation and rising debt in developed economies. Silver stands out because its demand is mainly industrial, in electronics and solar panels. In contrast, copper's rise reflects tight fundamentals and supply concerns, which could lead to short to medium-term deficits. Instability in the Gulf fuels risk-averse sentiment, favouring precious metals as safe-haven assets and making oil and gas prices very volatile between rises and sharp declines. However, energy remains a key input in metals production: higher energy costs drive up marginal production costs, supporting higher metal price incentives in the long run.
How are geopolitical tensions and fragmentation of supply chains reshaping the balance in the industrial and precious metals sector?
Geopolitical tensions are one of the main factors causing disruptions in the supply chain, especially since the processing of critical metals is highly concentrated in China. China currently dominates the processing of 19 of the 20 metals essential for the green transition. New technologies and the defence industry also need these metals. China has exploited this position in past diplomatic disputes. As a result, countries around the world are investing to protect their supply chains of strategic materials. As far as precious metals are concerned, rising geopolitical tensions reinforce their attractiveness, as they are considered safe haven assets in times of global instability.
The energy transition and the development of renewables are changing the structural demand for strategic metals. Which materials are most exposed to a long-term growth trend?
Although according to the IEA, demand for rare earths could grow by 50-60% by 2040, projects in the pipeline suggest that supply will be sufficient by 2035. However, Chinese dominance in processing remains a major risk. Copper faces a more immediate shortage. Demand growth outpaces supply growth, which is struggling to exceed 1.5% per year due to declining ore quality and long lead times. In the case of lithium, the IEA expects demand to quadruple by 2040. The risk of substitution is low due to its unique energy density. Current supply is limited by the closure of high-cost mines and reduced capital investment.
In a scenario of persistent inflation and high interest rates, can commodities be an effective hedge in investors' portfolios?
Due to their characteristics as real assets, commodities act as a natural hedge against inflation in many scenarios, providing an important element of protection and diversification for both institutional and retail portfolios.
