After decades of cost-driven offshoring, capital is pivoting towards domestic manufacturing, supply chain resilience and national security. This shift accelerated in 2026, marking a rotation from asset-light digital models to material-intensive industries.
Known as the heavy assets, low obsolescence (HALO) trade, this strategy prioritises companies with indispensable physical moats and enduring tangible assets.
The infrastructure required for the energy transition demands vast amounts of physical capital. Unlike the rapid turnover cycles seen in electronics, these heavy assets possess lifespans measured in decades. Consequently, the metals embedded within these systems face minimal risks of technological obsolescence.
For investors, success in the current landscape requires a disciplined value-chain approach to the world’s most critical tangible assets.
Defining the scope of strategic materials
Strategic materials are metals with vulnerable supply chains that remain essential for modern industrial applications. The EU’s Critical Raw Materials Act identifies 34 such substances, classifying 17 as strategic due to their role in the green transition. These materials are also vital for defence, aerospace and advanced digital systems.
The cornerstone of electrification, copper demand is now more and more decoupled from traditional gross domestic product (GDP) cycles.
Despite recent price fluctuations, lithium remains the fundamental component for high-density energy storage.
Aluminium enables vehicle lightweighting and is a key component in energy infrastructure as well as grids.
As the backbone of reindustrialisation, steel is essential for infrastructure and the defence-industrial complex.
Rare earths are critical for permanent magnets in electric motors and precision semiconductor manufacturing.
Demand is accelerating, but supply constraints are shaping the opportunity set.
Structural deficits and long-term demand drivers
The demand for strategic materials is propelled by three overlapping global trends that create a sustained consumption profile.
First, the move toward net zero remains the most influential driver. Electric vehicles and renewable energy systems are significantly more metal-intensive than their fossil-fuel predecessors. The International Energy Agency (IEA) projects that refined copper demand for clean energy could reach 32 million tonnes by 2030.
Second, the rise of artificial intelligence (AI) adds a sophisticated layer to the demand equation. Hyperscale data centres require robust, metal-heavy power grids to function.
Furthermore, semiconductor fabrication relies on niche elements like gallium and germanium. Recent export restrictions on these materials have introduced geopolitical premiums into technology supply chains.
Finally, infrastructure modernisation serves as the third pillar of this investment case. Large-scale public programmes in Europe and North America target the renewal of ageing grids and transport networks.
These multi-year projects require large quantities of steel and aluminium, supported by state-backed industrial frameworks and national infrastructure funds.
Supply inelasticity and barriers to entry
For the investor, supply-side constraints represent a core component of the HALO investment thesis. The supply of strategic materials remains stubbornly inelastic due to declining ore grades and rising extraction costs. Even during periods of high prices, physical output cannot be increased rapidly to meet market needs.
The heavy-asset nature of the mining sector creates barriers to entry. New projects often require billions in up-front capital expenditure (Capex) and permitting cycles that last more than a decade.
This environment grants existing producers with high-quality reserves a distinct competitive advantage. While recycling initiatives are expanding, they are unlikely to bridge the primary supply deficit before 2030.
Adopting a value-chain investment strategy
To capture the full potential of the HALO trade, investors should look beyond simple extraction. A sophisticated strategy balances upstream mining exposure with midstream and downstream resilience.
While miners provide direct leverage to commodity prices, midstream firms like cable manufacturers offer more consistent margins. These companies benefit from the total volume of material flow rather than spot price volatility.
In this context, sustainability serves as a critical risk-management tool. Aligning portfolios with Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR) helps mitigate environmental and social controversies.
Given that environmental, social and governance (ESG) failures are now primary drivers of project delays and stranded asset risks, rigorous integration is essential for protecting long-term industrial value.
A structural theme for the decade
Recent geopolitical tensions have accelerated the transition from a fossil-fuel economy to one built on strategic materials. They offer a unique combination of structural growth, inflation protection, and defensive utility.
The persistent tension between rising demand and constrained capacity provides a compelling entry point for disciplined investors.
Resource equities often rebound early when policy cycles turn supportive, and current valuations remain attractive compared to high-growth technology.
An actively managed portfolio that integrates the entire value chain is well-positioned to navigate cyclicality. By focusing on the tangible foundations of the energy and digital transitions, investors may secure durable value in an increasingly material world.
Asad Farid is portfolio manager of the JSS Sustainable Equity - Strategic Materials. The views expressed above should not be taken as investment advice.