Mr. Steffens, Aberdeen describes global electrification as one of the strongest long-term investment trends and is already speaking of the early stages of a new commodities supercycle. What makes you so sure that we are indeed facing a supercycle and not merely another cyclical commodities boom?

Karsten-Dirk Steffens: The sceptical view is: We have heard that before. Commodities rise, supply reacts, prices fall again. That is precisely why the distinction between a cyclical boom and a true supercycle is crucial. From our perspective, the supercycle thesis is based above all on three structural arguments: 

First, demand is anchored in politics and technology. This means, in particular, that in earlier commodities booms, demand was often dependent on individual economic cycles, such as China’s real estate and infrastructure boom in the 2000s. 

Second, the supply side is now reacting much more slowly. Strong demand alone is not enough for a supercycle. What matters is that supply cannot keep up quickly enough. 

And third, electrification is more material-intensive than many investors expect. 

The probability of a structurally longer demand cycle is higher today than in previous commodities bull markets because three forces are acting simultaneously for the first time: decarbonisation, electrification and the geopolitical reshaping of supply chains. What matters is that the supply side can only react very slowly.

The energy transition has been an investment theme for years. What has fundamentally changed over the past two or three years so that Future Minerals should be especially interesting right now?

The energy transition is indeed not a new theme. What is new, however, is that over the past two to three years we have been witnessing the transition from a political vision to industrial implementation. Today, people are no longer just formulating climate targets; power grids are being expanded, data centres are being built, energy storage systems are being installed and supply chains for critical raw materials are being strategically rebuilt. This development is creating significantly higher and, above all, more visible demand for certain minerals and metals. And that is only the beginning.

Artificial intelligence and the expansion of data centres are now often cited as new drivers of power and raw-material demand. Aberdeen itself notes, however, that the additional copper demand from data centres is significantly smaller than that from the expansion of power grids. Is the "AI boom" currently being overstated as an argument for raw-material investments?

No, I do not think the AI boom is overstated, but its role is often misunderstood. Artificial intelligence is an additional driver of demand, but not the central investment thesis. Our investment case for Future Minerals is based primarily on the electrification of the economy and the associated expansion of energy infrastructure. The additional copper demand from data centres is relevant, but compared with the expansion of power grids, renewable energy, storage systems and the electrification of transport, it is significantly smaller.

For many commodities, real market power today lies less in the mine itself than in the downstream processing steps.

Critical minerals are no longer just an investment theme, but part of geopolitics. China controls a significant share of the global value chain for various raw materials and processing steps. Is it even realistic to reduce the West’s dependence on China over the next ten years?

The West will probably not be able to completely reduce its dependence on China over the next ten years. For decades, China has systematically built not only the extraction of many critical minerals, but above all their processing, refining and industrial further processing. For many commodities, real market power today lies less in the mine itself than in the downstream processing stages. That is precisely where barriers to entry are high and new capacity cannot be created overnight. 

Nevertheless, we are already seeing an important strategic shift: the West’s goal is no longer complete independence, but targeted diversification. 

Political risks are among the most important risk factors in commodity investments.

Aberdeen deliberately focuses on countries such as Chile, China, Indonesia, Peru and Kazakhstan. How do you assess the political risk? Can a supposed commodities winner quickly become a loser through export restrictions, higher taxes or government intervention?

Yes, absolutely – I see it that way too. Political risks are among the most important risk factors in commodity investments. A country may have large raw-material reserves and yet lose attractiveness for investors if the regulatory framework deteriorates. Export restrictions, higher royalties, special taxes or government intervention can have a significant impact on the economics of a project. 

At the same time, these risks should be viewed in a differentiated way. Many raw-material-rich countries such as Chile, Peru and Indonesia know that they depend on international capital, technological know-how and stable investment conditions in the long term. Political intervention may seem attractive in the short term, but it carries the risk of deterring future investment. We therefore often see a balancing act between national interests and the goal of attracting foreign investors.

The Future Minerals Fund does not simply invest in mining companies, but across the entire value chain: from extraction and processing through batteries to specialty materials and recycling. Where, in your view, is the highest long-term value creation: with the owners of the raw materials or with the companies that process them further?

Especially in critical minerals, value creation occurs לאורך the entire chain. The owner of a high-quality copper or lithium deposit benefits from the scarcity of the raw material, while processors, battery technology companies and specialty materials manufacturers benefit from their know-how, technology and barriers to market entry. That is precisely why we deliberately invest across the entire value chain and not solely in mining companies. 

The importance of processing and refining is also underlined by the strong concentration of these activities in China. In the long term, we often see the most attractive and stable value-creation potential in processing, specialty materials and recycling. There, margins are often less directly dependent on short-term raw-material price fluctuations and are more strongly determined by technological expertise, economies of scale and market position.

In addition, we expect recycling to play an increasingly important role in the future, as many economies seek to increase supply security and recover part of the raw materials they need from existing material flows.

Commodity stocks are notorious for strong cycles. How do you recognise when a structural investment theme has turned into an overvalued market story?

That is exactly one of the most important questions in the commodities space. Structural trends can deliver strong returns over many years, but at some point there is always the risk that investors confuse a good story with a good investment.

That is why we pay less attention to headlines and more to fundamentals. A warning sign, for example, would be if company valuations rose significantly faster than actual demand for the underlying raw materials. We also become cautious when companies massively expand capacity even though end demand is already showing signs of weakening.

Especially in the Future Minerals space, what matters to us is whether the long-term drivers remain intact: electrification, the energy transition, the expansion of power grids, digitalisation and geopolitically motivated investment in more resilient supply chains. As long as these factors increase physical demand for critical raw materials, we are talking about a structural investment trend and not merely a market story.

The real contradiction is not between the energy transition and mining, but between the desire for decarbonisation and the idea that it can be achieved without physical raw materials. 

The energy transition requires enormous quantities of additional raw materials. At the same time, mining and raw-material processing are among the most environmentally and socially problematic industries of all. Isn’t the idea of a "green" energy transition without significantly more mining ultimately a contradiction?

I would even go so far as to say: an energy transition without additional mining is not a realistic option. The real contradiction is not between the energy transition and mining, but between the desire for decarbonisation and the idea that it can be achieved without physical raw materials. 

A electrified economy requires more copper, more lithium, more nickel, more aluminium and more rare earths than today’s fossil fuel-based energy system. Power grids, battery storage, wind farms, solar installations, data centres and electric vehicles ultimately consist of large quantities of materials and metals. The International Energy Agency therefore expects a significant surge in demand for various critical minerals over the coming decades. 

The decisive question is therefore not whether we need more mining, but how that mining is carried out. Standards relating to environmental protection, water consumption, occupational safety, human rights and local value creation vary considerably worldwide. For investors, it is therefore becoming increasingly important to identify companies that extract and process critical raw materials responsibly.

Are we now roughly where Future Minerals is today where technology stocks were before the internet boom?

At first glance, the comparison seems obvious, but it should not be overstretched. From our perspective, we are not facing a repeat of the internet boom, but a different kind of transformation. The internet was about the digitalisation of information and business models. 

Future Minerals is about the physical infrastructure of an electrified world. What both developments have in common is that they are based on long-term structural changes. There are indeed some parallels. In the 1990s, many investors had a vague sense that the internet would become important, but few could estimate the actual scale of the change. 

Today we see a similar picture with electrification. Most investors recognise the importance of electric vehicles, renewable energy or AI data centres. What is often underestimated, however, are the material requirements needed for this, especially in power grids, energy storage and critical minerals.

Demand for these raw materials is being driven not by a single technology, but by several structural trends at the same time. Perhaps we are where technology was before the internet boom. The difference is this: the internet mainly needed software and fibre-optic cables. Electrification needs copper, lithium, nickel, power grids, batteries and data centres. This transformation is significantly more material-intensive and therefore perhaps even more shaped by physical scarcity.