Strategic materials are challenging the role of oil as the cornerstone of the economy, driven by accelerated artificial intelligence power infrastructure requirements and the ongoing energy transition. Speaking at a Paris briefing marking the second anniversary of the JSS Sustainable Equity – Strategic Materials fund, Swiss private bank J. Safra Sarasin detailed a structural shift toward the 17 critical raw materials classified by European regulation.
The Bottom Line
- Global demand for critical minerals is projected to double by 2050, while supply for the 17 designated strategic materials faces severe constraints.
- Commodities and industrial metals have demonstrated significant resilience, with the Bloomberg Commodity Index advancing 23%, industrial metals gaining 17%, and precious metals rising 86% between July 2023 and July 2026.
- Market tailwinds include persistent geopolitical friction, higher-for-longer interest rates with US 10- and 30-year bond yields holding near 5%, and a post-Covid structural inflation regime.
From the Oil Century to the Metals Era
The macroeconomic framework governing international trade is undergoing a structural break. Speaking to journalists and MarketScreener.com at the firm’s Paris offices, Joran Mambir, investment products specialist at J. Safra Sarasin, outlined the dimensions of this transition. “The 20th century was the century of oil, the cornerstone of the economy. That role is now being challenged by strategic materials, which are emerging as central building blocks of our economies,” Mambir stated. Here is the math: this paradigm shift coincides with a permanent departure from the sub-2% inflation environment of the post-2008 era, establishing a higher-cost regime that structurally favors scarce physical commodities.
The regulatory architecture supporting this shift was codified when European authorities published a framework listing 34 critical minerals and metals. Within that roster, 17 resources hold designation as strategic materials due to their irreplaceable function in aerospace, defense, and the green and digital transitions. But the balance sheet tells a different story regarding future supply and demand dynamics: consumption curves point to a doubling of requirements by mid-century, while extraction and processing bottlenecks threaten to restrict availability.
Regulatory Classifications and Market Vulnerabilities
The European Union’s designated list of 17 strategic raw materials spans multiple critical sectors, each carrying unique supply chain vulnerabilities:
- Aluminum, Bauxite, and Alumina: Essential for light-weighting in transportation and aerospace applications.
- Bismuth: Utilized in low-melting-point alloys and specialty metallurgy.
- Boron: Required for permanent magnets and technical glass manufacturing.
- Cobalt and Lithium: Core components anchoring electric vehicle battery technology and energy storage systems.
- Copper: The benchmark electrification metal governing power grids and industrial wiring.
- Gallium and Germanium: Critical inputs for semiconductors, advanced chips, LEDs, fiber optics, and infrared technologies.
- Anode and cathode materials including Natural Graphite, Manganese, and Nickel (cathode grade), which power high-density battery chemistries.
- Magnesium Metal: Deployed in ultra-light aluminum alloy production.
- Platinum Group Metals (PGMs): Necessary catalysts for green hydrogen electrolyzers.
- Silicon Metal: Required for photovoltaic solar panels and electronic microprocessors.
- Rare Earths: Neodymium, dysprosium, praseodymium, and terbium, which drive high-performance electric motors and wind turbine generators.
- Titanium Metal and Tungsten: Strategic materials anchoring aerospace, defense manufacturing, industrial cutting tools, and high-temperature alloys.
| Asset Index | Total Return (%) | Primary Driver |
|---|---|---|
| Bloomberg Commodity Index | +23% | Broad industrial demand and energy volatility |
| Industrial Metals | +17% | Electrification and grid infrastructure expansion |
| Precious Metals | +86% | Geopolitical hedging and monetary demand |
Geopolitical Catalysts and Protectionist Trade Policies
The operational environment for these commodities is increasingly shaped by regulatory interventions and trade friction. Over the past two years, governments have systematically implemented defensive economic measures. The United States has rolled out tighter tariff barriers, while Europe initiated the rollout of the Carbon Border Adjustment Mechanism (CBAM) to shield domestic industries from carbon leakage. Simultaneously, China continues to use its dominant market share in rare earth element extraction and processing during bilateral trade negotiations.
Asad Farid, lead portfolio manager for the Strategic Materials fund at J. Safra Sarasin, addressed the resilience of commodities during the briefing. Analyzing the asset class performance spanning July 2023 to July 2026—during which the Bloomberg Commodity Index advanced 23%, industrial metals rose 17%, and precious metals surged 86% according to J. Safra Sarasin and Bloomberg data—Farid emphasized that ongoing geopolitical flashpoints, including the conflict in Eastern Europe and tensions involving the US and Iran, act as primary performance catalysts. “When we look at industrial metals, and especially electrification metals, we believe they can perform well during periods of high oil volatility,” Farid explained.
With US 10- and 30-year bond yields holding under pressure around 5% and structural inflation altering capital allocation models, institutional portfolios are recalibrating exposure.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
