Find Clarity Amid Chaotic Commodities: Webinar Highlights
April 11, 2022
Read Time 6 MIN
Amid ongoing volatility in the commodity space, we examine the themes and companies most likely to benefit in the new commodity world order.
On a recent webinar, senior investment professionals from across our global resources team shared their views on commodity volatility and discussed key themes to help investors navigate the turbulent market backdrop. For those seeking to invest in commodities, there are three key takeaways from the webinar:
- A super-cycle begins: Current geopolitical risks have massively amplified the underlying fundamental imbalances in the commodities market.
- Global supply chains will change: This disruption to global commodities markets has reemphasized the need to address key themes of inflation, energy transition and supply securitization.
- New winners will emerge: Innovative and sustainable companies are poised to meet immediate challenges and benefit from the long-term needs of the new global market.
The following summary features highlights from the conversation, including an overview of the specific companies that are likely to benefit in the new commodity world order. The full webinar replay can be viewed here: Find Clarity Amid Chaotic Commodities.
High inflation is being caused by forces that were in place long before Russia’s invasion of Ukraine. Prices for everyday goods began to spike in 2020 due to massive stimulus measures, recovering demand and looming supply constraints (00:04:23).
Even if the impact of Russia’s invasion of Ukraine starts to wane, we expect commodity prices to remain at record highs given the fundamental backdrop of the market. As an example, global energy inventories remain low as energy producers significantly cut their spending over the past several years, resulting in lower supply. At the same time, demand for energy continues to rebound and is closer to pre-pandemic levels. The resulting supply and demand imbalance is fertile ground for a sustained period of higher prices (00:13:48).
Europe Accelerates Its Push to Reduce Dependency on Russian Energy Supply
While the fundamental commodity backdrop was in place long before the invasion of Ukraine, Russia’s recent actions will have lasting effects. Most notably, Europe will accelerate efforts to diversify its energy imports and wean itself from Russian supply (00:05:56).
Europe is among the largest consumers of Russian-supplied oil and gas. The European community was already on a path to diversify its sources of energy, a plan that it has accelerated since the conflict in Ukraine. Europe’s plan has three main components:
- Diversification strategy: Ensure gas storage levels of 90% by October 1, 2022; add new liquefied natural gas (LNG) and pipelines; scale renewable gas production 55 billion cubic meters (bcm) by 2030 (including biomethane and hydrogen).
- Electrification strategy: Increase wind and solar deployment by 20%; encourage behavioral changes in energy consumption and use of heat pumps.
- Fuel switching options: An additional 120 terawatt-hours in coal-fired generation to cut gas demand by 22 bcm in one year; return nuclear reactors under maintenance in 2022 and temporarily delay the shutdown of any major reactors.
New Energy Winners Emerge
The shift in commodity market supply and demand dynamics will pave the way for new winners to emerge. In Europe, Equinor (EQNR) is a reliable E.U. gas supplier that is well positioned to deliver more gas to Europe due to the increased production efficiency at the company’s existing facilities. Equinor is also a pioneer in offshore wind energy, leaving the company well positioned to help Europe deliver on its electrification strategy (00:09:45).
Equinor to the Rescue in Europe?
Source: Bloomberg New Energy Finance (BNEF), VanEck. Data as of March 2022. The reader should not assume that an investment in the securities identified was profitable. Past performance is not indicative of future results. Not a recommendation to buy or sell a security.
Outside of Europe, the U.S. energy industry is also positioned to benefit from the changes in the global market. The E.U. is likely to tap into the U.S.’ growing exports of LNG as part of its plan to diversify its gas supply. In addition, the U.S. has become a net exporter of crude oil and petroleum products in the past several years, establishing itself as one of the top suppliers of traditional energy (00:14:48).
Among U.S. names, we believe Chart Industries is particularly well positioned. Chart Industries is a leading global manufacturer of engineered equipment that is used in every phase of the liquid gas supply chain, including upfront engineering, service and repair (00:17:55).
Shift Towards Renewable Energy Creates New Supply Concerns
In addition to changes in the global supply chain for traditional energy sources, countries around the world are taking steps that will accelerate the adoption of renewables (00:20:03).
With a greater emphasis on responsible sourcing of minerals, global concerns are now mounting over the geographic concentration of minerals extraction and processing. Over time, we expect governments will incentivize the development of onshore supply (00:25:19).
It’s Lonely at the Top: Minerals Supply Chain is Heavily Concentrated
Source: IEA. Data reflects 2019 extraction and processing figures as presented in IEA’s 2021 report The Role of Critical Minerals in Clean Energy Transitions.
In the meantime, key input minerals for clean energy technologies are already seeing dramatic price increases. We believe Vale, primarily known as an iron ore company, is well positioned to take advantage of this surge in prices. In addition to iron ore, Vale is also one of the largest producers of nickel (00:31:41).
Metal Prices Surge: 3-Year Cumulative Price Change
Source: Bloomberg. Data as of February 2022. Past performance is not indicative of future results.
Don’t Forget About Food Price Inflation
Over the past few years, food prices began to soar due to poor weather and the pandemic-driven supply chain disruption. The conflict in Ukraine has exacerbated the situation and is contributing to even higher prices for agricultural commodities (00:33:58).
In the agricultural space, we believe Nutrien will emerge as a winner. Nutrien is poised to produce nearly 1/4 of total global potash volumes in 2022 as it ramps up production to meet the shortfall from Russia and Belarus (00:40:09).
How to Hedge Against Inflation
With the recent surge in prices, many investors have scrambled to find ways to protect their portfolios from inflation. Historically, commodity-equity investments have been an excellent way to hedge against inflation. Investors last faced inflation risk in the early-to-mid 2000s with the most notable bout of inflation occurring in the 1970s. Historically, commodities have acted as a hedge against inflation, outperforming U.S. stocks and bonds. Even in periods of modest inflation (2-6%) commodities have outperformed U.S. stocks.
VanEck Inflation Sensitive Solutions
VanEck has a history of inflation sensitive investing in natural resources and commodities for over 50 years, offering investors actively and passively managed strategies, from physical commodities to natural resource equities. We offer specialized exposure to individual sectors and diversified solutions with broad exposure across sectors and industries.
| Name | Symbol | Agriculture & Agri-Food Technology |
Gold/ Precious Metals |
Base/ Industrial Metals |
Strategic/ Rare Earth Metals |
Renewable/ Alternative Energy |
Traditional Energy (Oil & Gas) |
Energy MLPs |
Infra- structure |
REITs |
| Global Resources Fund | GHAAX/ GHAIX | ■ | ■ | ■ | ■ | ■ | ■ | |||
| CM Commodity Index Fund | CMCAX/ COMIX | ■ | ■ | ■ | ■ | |||||
| International Investors Gold Fund | INIVX/ INIIX | ■ | ||||||||
| Oil Refiners ETF | CRAK | ■ | ||||||||
| Energy Income ETF | EINC | ■ | ■ | |||||||
| Gold Miners ETF | GDX | ■ | ||||||||
| Junior Gold Miners ETF | GDXJ | ■ | ||||||||
| Green Metals ETF | GMET | ■ | ■ | |||||||
| Natural Resources ETF | HAP | ■ | ■ | ■ | ■ | ■ | ■ | |||
| Agribusiness ETF | MOO | ■ | ||||||||
| Uranium+Nuclear Energy ETF | NLR | ■ | ■ | |||||||
| Oil Services ETF | OIH | ■ | ||||||||
| VanEck Merk Gold Trust | OUNZ | ■ | ||||||||
| Inflation Allocation ETF | RAAX | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ |
| Rare Earth/Strategic Metals ETF | REMX | ■ | ||||||||
| Steel ETF | SLX | ■ | ||||||||
| Low Carbon Energy ETF | SMOG | ■ | ||||||||
| Future of Food ETF | YUMY | ■ |
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This material does not constitute an offer to sell or solicitation to buy any security, including shares of any Fund. An offer or solicitation will be made only through a Fund’s prospectus or summary prospectus and will be subject to the terms and conditions contained. This material and the information provided herein are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of (or located or established in) any jurisdiction where the distribution of these materials and/or the purchase or sale of interests of a Fund would be contrary to applicable law or regulation or would subject a Fund to any registration or licensing requirement in such jurisdiction. Persons who wish to review this material are required to inform themselves about and to observe any legal or regulatory restrictions which may affect their eligibility to make an investment in a Fund. Professional advice should be sought in cases of doubt.
Any projections, market outlooks or estimates in this material are forward-looking statements and are based upon certain assumptions that are solely the opinion of VanEck. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. Further, any information regarding portfolio composition, portfolio composition methodology, investment process or limits, or valuation methods of evaluating companies and markets are intended as guidelines which may be modified or changed by VanEck at any time in its sole discretion without notice.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
Please see the prospectus and summary prospectus of each fund for more complete information regarding its specific risks. You can lose money by investing in the Funds. Any investment in the Funds should be part of an overall investment program, not a complete program. Diversification does not assure a profit or protect against loss.
CM Commodity Index Fund is subject to the risks associated with its investments in commodity linked derivatives, risks of investing in a wholly owned subsidiary, risk of tracking error, risks of aggressive investment techniques, leverage risk, derivatives risks, counterparty risks, non-diversification risk, credit risk, concentration risk, and market risk. The use of leverage may magnify losses. Please see the prospectus and summary prospectus for information on these and other risk considerations.
Global Resources Fund is subject to risks associated with concentrating its investments in hard assets and the hard assets sector, including real estate, precious metals, and natural resources, and can be significantly affected by events relating to these industries, including international political and economic developments, inflation, and other factors. The Fund's portfolio securities may experience substantial price fluctuations as a result of these factors, and may move independently of the trends of industrialized companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in derivative, commodity-linked instruments, and illiquid securities. The Fund is also subject to inflation risk, market risk, non-diversification risk, and leverage risk.
International Investors Gold Fund is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The Fund’s overall portfolio may decline in value due to developments specific to the gold industry. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in derivatives, commodity-linked instruments, illiquid securities, and small- or mid-cap companies. The Fund is also subject to inflation risk, market risk, non-diversification risk, leverage risk, and risks of investments in a wholly owned subsidiary.
Principal VanEck Equity ETF Risk Factors include sector, market, economic, political, foreign currency, world event and index tracking risks. Additional risks include fluctuations in net asset value as well as the risks associated with investing in non-diversified portfolios made up of companies with medium- and small-capitalizations and with limited operating histories.
VanEck Merk® Gold Trust: This material must be preceded or accompanied by a prospectus for the VanEck Merk Gold Trust (the “Trust"). Before investing, you should carefully consider the Trust’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting vaneck.com/ounz or calling 800.826.2333. Please read the prospectus carefully before you invest.
Investing involves risk, including possible loss of principal. The Trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for the purposes of the Commodity Exchange Act. Shares of the Trust are not subject to the same regulatory requirements as mutual funds. Because shares of the Trust are intended to reflect the price of the gold held in the Trust, the market price of the shares is subject to fluctuations similar to those affecting gold prices. Additionally, shares of the Trust are bought and sold at market price, not at net asset value (“NAV”). Brokerage commissions will reduce returns.
The request for redemption of shares for gold is subject to a number of risks including but not limited to the potential for the price of gold to decline during the time between the submission of the request and delivery. Delivery may take a considerable amount of time depending on your location.
Commodities and commodity-index linked securities may be affected by changes in overall market movements and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.
Trust shares trade like stocks, are subject to investment risk and will fluctuate in market value. The value of Trust shares relates directly to the value of the gold held by the Trust (less its expenses), and fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon the sale of the shares, which trade at market price, may be more or less than the value of the gold represented by them. The Trust does not generate any income, and as the Trust regularly issues shares to pay for the Sponsor’s ongoing expenses, the amount of gold represented by each Share will decline over time. Investing involves risk, and you could lose money on an investment in the Trust. For a more complete discussion of the risk factors relative to the Trust, carefully read the prospectus.
The sponsor of the VanEck Merk Gold Trust is Merk Investments LLC (the “Sponsor”). Van Eck Securities Corporation and Foreside Fund Services, LLC, provide marketing services to the Trust.
© 2022 Merk Investments LLC. © 2022 VanEck. All trademarks, service marks or registered trademarks are the property of their respective owners.
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IMPORTANT DISCLOSURES
This material does not constitute an offer to sell or solicitation to buy any security, including shares of any Fund. An offer or solicitation will be made only through a Fund’s prospectus or summary prospectus and will be subject to the terms and conditions contained. This material and the information provided herein are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of (or located or established in) any jurisdiction where the distribution of these materials and/or the purchase or sale of interests of a Fund would be contrary to applicable law or regulation or would subject a Fund to any registration or licensing requirement in such jurisdiction. Persons who wish to review this material are required to inform themselves about and to observe any legal or regulatory restrictions which may affect their eligibility to make an investment in a Fund. Professional advice should be sought in cases of doubt.
Any projections, market outlooks or estimates in this material are forward-looking statements and are based upon certain assumptions that are solely the opinion of VanEck. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. Further, any information regarding portfolio composition, portfolio composition methodology, investment process or limits, or valuation methods of evaluating companies and markets are intended as guidelines which may be modified or changed by VanEck at any time in its sole discretion without notice.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
Please see the prospectus and summary prospectus of each fund for more complete information regarding its specific risks. You can lose money by investing in the Funds. Any investment in the Funds should be part of an overall investment program, not a complete program. Diversification does not assure a profit or protect against loss.
CM Commodity Index Fund is subject to the risks associated with its investments in commodity linked derivatives, risks of investing in a wholly owned subsidiary, risk of tracking error, risks of aggressive investment techniques, leverage risk, derivatives risks, counterparty risks, non-diversification risk, credit risk, concentration risk, and market risk. The use of leverage may magnify losses. Please see the prospectus and summary prospectus for information on these and other risk considerations.
Global Resources Fund is subject to risks associated with concentrating its investments in hard assets and the hard assets sector, including real estate, precious metals, and natural resources, and can be significantly affected by events relating to these industries, including international political and economic developments, inflation, and other factors. The Fund's portfolio securities may experience substantial price fluctuations as a result of these factors, and may move independently of the trends of industrialized companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in derivative, commodity-linked instruments, and illiquid securities. The Fund is also subject to inflation risk, market risk, non-diversification risk, and leverage risk.
International Investors Gold Fund is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The Fund’s overall portfolio may decline in value due to developments specific to the gold industry. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in derivatives, commodity-linked instruments, illiquid securities, and small- or mid-cap companies. The Fund is also subject to inflation risk, market risk, non-diversification risk, leverage risk, and risks of investments in a wholly owned subsidiary.
Principal VanEck Equity ETF Risk Factors include sector, market, economic, political, foreign currency, world event and index tracking risks. Additional risks include fluctuations in net asset value as well as the risks associated with investing in non-diversified portfolios made up of companies with medium- and small-capitalizations and with limited operating histories.
VanEck Merk® Gold Trust: This material must be preceded or accompanied by a prospectus for the VanEck Merk Gold Trust (the “Trust"). Before investing, you should carefully consider the Trust’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting vaneck.com/ounz or calling 800.826.2333. Please read the prospectus carefully before you invest.
Investing involves risk, including possible loss of principal. The Trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for the purposes of the Commodity Exchange Act. Shares of the Trust are not subject to the same regulatory requirements as mutual funds. Because shares of the Trust are intended to reflect the price of the gold held in the Trust, the market price of the shares is subject to fluctuations similar to those affecting gold prices. Additionally, shares of the Trust are bought and sold at market price, not at net asset value (“NAV”). Brokerage commissions will reduce returns.
The request for redemption of shares for gold is subject to a number of risks including but not limited to the potential for the price of gold to decline during the time between the submission of the request and delivery. Delivery may take a considerable amount of time depending on your location.
Commodities and commodity-index linked securities may be affected by changes in overall market movements and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.
Trust shares trade like stocks, are subject to investment risk and will fluctuate in market value. The value of Trust shares relates directly to the value of the gold held by the Trust (less its expenses), and fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon the sale of the shares, which trade at market price, may be more or less than the value of the gold represented by them. The Trust does not generate any income, and as the Trust regularly issues shares to pay for the Sponsor’s ongoing expenses, the amount of gold represented by each Share will decline over time. Investing involves risk, and you could lose money on an investment in the Trust. For a more complete discussion of the risk factors relative to the Trust, carefully read the prospectus.
The sponsor of the VanEck Merk Gold Trust is Merk Investments LLC (the “Sponsor”). Van Eck Securities Corporation and Foreside Fund Services, LLC, provide marketing services to the Trust.
© 2022 Merk Investments LLC. © 2022 VanEck. All trademarks, service marks or registered trademarks are the property of their respective owners.