Guest post by Luke Hatkinson-Kent
As a nation, Australia has always relied heavily on its natural resources, which include valuable commodities such as coal. It is therefore no surprise that the nation’s sudden economic contraction last autumn coincided with a gradual decline in the global demand for coal, which in turn has been triggered by the rise of alternative energy sources. It is estimated that the demand for coal will continue over the next five years, falling to just 36% by the end of 2021.
As anyone who trades through resources such as City Index can testify, however, the financial marketplace is constantly exposing investors to new commodities and asset classes. These can be leveraged by both investors and economies to generate income, and include everything from carbon units to tech metals.
Tech metals are particularly interesting, as they sit at the heart of a mining boom in Australia, and potentially further across the globe. But what are tech metals, and why are they so important in the current economic climate?
What Are Tech Metals?
Essentially, tech metals are complex and consist of rare earths and other minerals (or metals) to create a composite commodity. They have hit the headlines recently due to the prominent role that they play in driving technology and the new economy, as they are integral to the manufacturing of products such as mobile phones, solar cells and even autonomous vehicles. More importantly, they are used to make renewable batteries, which are increasingly popular in the consumer electronics industry.
They even contribute to the development of advanced, lightweight engines, which will replace the traditional combustion entities currently used.
Why Are Tech Metals So Important to Australia and Investors?
As we can see, tech metals are playing an increasingly seminal role in an age of technological advancement, and this delivers huge benefits to Australia and any other countries that can count on them as a natural resource. More specifically, the export of tech metals translates into sustainable economic growth, as the demand for such minerals is likely to increase exponentially in the future. This will manifest itself in the form of rising taxable revenue and higher volumes of exports, while it will also drive job creation across multiple industries.
A Note of Caution: How Can Economies and Investors Capitalise?
While tech metals offer incredible potential from the perspective of Australia and similar economies, it is important that they are able to fully leverage this. There is a sense that the nation failed to achieve this during the last mining boom involving iron ore and coal, which were simply shipped offshore in bulk to China and used to manufacture products that delivered additional value. Many of these were then exported back Australia, but for a significantly higher and disproportionate price point.
This is why experts in Australia are calling for the government and the private sector to develop a critical value-adding component, which can optimise the potential of tech metals and enable the nation to finally gain a competitive edge over China.
From an investor perspective, it is imported to gain access to tech metals and ground level, while they remain a relatively niche commodity that is subject to only marginal demand. The result of this is that the value of tech metals remains low at present, so investing now could enable traders to achieve significant gains in the longer-term.
Over time, tech metals could emerge as a secure store of wealth like gold or the Japanese Yen, as it represents an asset class with almost guaranteed growth potential in the future.