The ASX is known for being a commodity-heavy share market.
Australia is a global iron ore mining powerhouse thanks to ASX shares like Rio Tinto Limited (ASX: RIO), BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG) and Mineral Resources Limited (ASX: MIN).
However, some analysts think that green commodities could be a way to protect against inflation. That's according to Andrew McAuley, chief investment officer at Credit Suisse Australia, as reported by the Australian Financial Review.
Mr McAuley said:
The role of metals in the transition to more sustainable production and consumption (e.g. through electric vehicles) should continue in 2022 with the materials sector well-placed to benefit from those structural changes.
Which ASX shares are involved in green metals?
There are a few different commodities that can count as a green resource.
One commodity involved in the decarbonisation of the world is nickel.
Nickel, according to the Nickel Institute, can be used in the gearing and generator components of onshore wind power. In offshore wind generation, nickel is useful thanks to its fouling and corrosion protection. Tidal power and emerging wave power systems face similar marine corrosion and fouling environments, according to the institute.
Nickel can also be used as part of solar power generation, geothermal energy and rechargeable batteries. It is also used in electric vehicles.
Two of the biggest miners involved in nickel production are BHP and Nickel Mines Ltd (ASX: NIC).
Lithium is another of the commodities that is experiencing a rapid increase in demand as electric vehicles and other battery uses soar. There are a few different ASX shares involved with this green metal, including Pilbara Minerals Ltd (ASX: PLS).
Rio Tinto, which is growing its exposure to lithium, has said that the market fundamentals for battery grade lithium carbonate are strong, with lithium demand forecast to grow by between 25% to 35% per annum over the next decade with a significant supply demand deficit expected from the second half of this decade.
Minerals Resources also has a sizeable presence in the lithium space.
Copper is another green metal. According to the International Copper Association Australia (ICA)), it's a highly efficient electricity conductor. It is used in renewable energy systems to generate power from solar, hydro, thermal and wind energy. Copper is helpful at making energy systems more efficient. It is also helpful for making buildings and other products more energy efficient.
Two of the biggest businesses involved in copper mining includes BHP and OZ Minerals Limited (ASX: OZL).
However, whilst BHP, Rio Tinto, OZ Minerals, Nickel Mines, Mineral Resources and Pilbara Minerals may all be inflation-protection possibilities, the profit they can generate is heavily linked to the changing commodity prices which can go down as well as up.
