Minerals Markets at Their Core

The mineral market involves many different areas and securities. What makes up this market? What are the pros and cons of investing in this market? We explore those questions and more! Jin Hennig, Managing Director and Global Head of Metals at CME Group joins Cassidy Clement to discuss.

Summary – Cents of Security Podcasts Ep. 100

Cassidy Clement 

Welcome back to the Cents of Security Podcast. I’m Cassidy Clement, Senior Manager of SEO and Content here at Interactive Brokers, and today I’m your host for our podcast. Our guest is Jin Hennig, Managing Director and Global Head of Metals at CME Group. 

The mineral market involves many different areas and securities, but what makes up the market? What are the pros and cons of investing in this market? We’re going to explore all of those questions and more. Welcome to the program, Jin. 

Jin Hennig 

Thanks for having me, Cassidy. 

Cassidy Clement 

Yeah, of course. So, since today we’re going to be talking about a very hot topic—minerals, metals, everything associated with it—what is your background in the industry? Let’s talk. You’re the perfect guest, so I am excited for everybody to hear your background. 

Jin Hennig 

So, I’ve been involved in the commodities and financial markets for about two decades now, with a focus specifically in metals. That includes both precious and industrial as well. I started my career actually in the physical industry before I joined the exchange, so I have a unique sort of experience that spans from physical trading to financial markets. 

I’ve worked very closely with corporates, miners, the producers, all the way to manufacturers. Then, now moved to the exchange business, I interact on a regular basis with the financial industry, such as institutional investors, trading platforms, hedge funds. It gives me a very well-rounded perspective on how the minerals markets function from the ground up. 

Cassidy Clement 

Yeah, that’s great. Just to dive in here—most people initially are going to think that the minerals market is something they can identify. I think the earliest, most identifiable thing that most people come into contact with is they think, “Oh, silver and gold,”—that’s very straightforward. 

But there are many other things. What exactly makes up the market in the securities area? 

Jin Hennig 

Cassidy, you’re absolutely right. The mineral market is a broad ecosystem. I always joke with my kids and say, “Anything that comes out of the ground, the dirt…” There are a lot of minerals you see in the entire chemistry chart. 

But to your point, it includes precious metals like gold, silver, platinum, and palladium, which are often viewed as safe-haven stores of value and inflation hedges. Then, on the other side, you have industrial metals, which actually act a lot like general industrial commodities—copper, aluminum, lithium, cobalt, steel—which are critical for manufacturing, infrastructure build, and nowadays, increasingly, technology like electric vehicles, AI, and renewable energy systems as well. 

Cassidy Clement 

Yeah, I think automated and electric vehicles—that’s where you really start to hear a lot of these keywords when it comes to minerals and metals. 

But in my research, I noticed there was a lot of, we’ll say, jargon associated with the actual market or the submarket of the larger financial area—things like major and junior groups. 

What exactly are those, and what makes them different from each other? 

Jin Hennig 

So, in the mining world, companies are generally divided into major producers and junior miners. 

Major producers—think of them as very large, established firms with producing assets. They tend to be multinational by nature. We are talking about companies that employ hundreds of thousands of people—just because metals and mining, in general, hire a lot of employees. They tend to have a very diversified portfolio, so it’s not going to be just one mineral they produce, but multiple ones, with a more stable cash flow. 

So think of companies like BHP, Rio Tinto, Freeport-McMoRan—these would be considered major miners. 

And then you’ve got juniors. Juniors tend to be smaller, often in the exploration stage. They might be in the production stage or not even there yet—just exploring and developing new resources. 

They carry higher risk, obviously, but also have potentially higher reward—especially if they make a significant discovery or get acquired by a major. 

Cassidy Clement 

So, a lot of the elements associated with this—no pun intended—you can almost see them out in your life or interact with them daily. 

A lot of people may initially look at this type of market or category and say, “This totally makes sense because it’s super crucial,” and it seems like a pretty good area to invest in. 

But what are the pros and cons associated with this investment area? 

Jin Hennig 

Sure. But before I go in there, Cassidy, let me just talk about some of the ways that you can have investment exposure in these markets. 

So, number one—I would say there are largely three categories. 

Number one is you can have direct exposure through commodity futures contracts. A good example would be CME’s gold, silver, copper, and aluminum. And we actually now have a growing group of battery-linked contracts such as lithium and cobalt as well. 

The second way to think about it is you can have equity exposure via stocks—ranging from, as we talked about earlier, large producers to juniors as well. 

But many times the challenge with that is, they tend to produce multiple different minerals and metals at a specific mine. And there are many other factors that go into stock valuation. Two companies might be in the same industry producing the same thing, but their valuation could be hugely different based on how they operate. 

You might see a mine that produces gold and copper as a byproduct at the same time, but the price movement of these two underlying products could be massively different. So yes, you can expose yourself via stock, but there are many other risk factors involved. 

And then the third is diversified options, like mutual funds or ETFs, that focus on a specific segment. A good example would be an energy transition metals index or a precious metals index, which would have a basket grouping of different underlying products as well. 

So, I would say there are three different ways to think about how you get exposure to some of these minerals and metals sectors. 

Now, the biggest benefit—you hear a lot on the news lately—is the potential for strong returns, especially in bull markets driven by supply and demand factors. 

You hear this across all segments of metals. In fact, if you think about it, gold has been the best-performing asset this year. So, you certainly see that playing a factor. 

The second is diversification strategy—away from traditional asset classes like equities and bonds. Commodities tend to have a different correlation, so it’s just another diversification strategy. 

The third would be hedging against inflation or currency devaluation. Commodities tend to hold their value—this is especially the case for precious metals such as gold, silver, platinum, and palladium. 

Now, if you’re thinking about risk factors or cons 

Number one is high volatility. Prices can swing sharply due to macro factors or geopolitical events. But at the same time, that’s also what attracts investors and makes it interesting. 

As I mentioned earlier with stocks, you get exposure to many different things alongside the underlying commodity—such as operational risk. 

The third is environmental and political risk, particularly in regions where mining policies may shift unpredictably. And, obviously, the most commonly used word lately is “tariff,” and that certainly has impacted our metals market across the board. 

But in general, I think futures contracts come in handy when you can handpick specific minerals or metals you want exposure to and take some of the broader risks out of the picture. 

You can also have more leverage through futures contracts, where you’re putting down only a certain percentage of the underlying full value for that entire exposure. 

So, I think there’s a benefit to futures contracts for being able to tailor specific exposure and also leverage—futures offer much more of that compared to fully owning certain assets or buying gold bars and just holding onto them. 

Cassidy Clement 

That’s a really great point. We actually touched on that a little bit when—I think it was in the past month that it was released—our podcast on gold, talking about an aspect that not a lot of people think about storage. 

When you have a tangible asset, things of that nature, what type of exposure can you actually handle? Secure hold versus what you want as your outcome, based on your financial goals. 

There’s a lot to consider. And in this area, it seems there’s definitely a variety of different securities that allow you to get that exposure. 

We’re going to dive a little bit deeper now, because we’ve laid the foundation for our listeners—if they’re new to the financial sector that is metals. 

But what are some things to keep in mind when you are actively investing in mineral-based products? Because as most people can deduce, there are going to be areas with commodity price fluctuations, correlations to other stock markets or variables—the geopolitical and environmental factors are huge. 

What are some initial things to keep in mind—or maybe like a short checklist—when you’re evaluating it as a potential integration into your financial strategy? 

Jin Hennig 

Great question, Cassidy. I think there are so many different factors that go into the movements of metals and underlying minerals, but I would categorize maybe three things to really think about before investing. 

Number one is commodity price fluctuations. A lot of these metals and minerals are heavily influenced by global economic activities, monetary policy, currency movements. Tariffs, for example, have impacted—and continue to impact—the market. Section 232, for example, is affecting our markets in steel, aluminum, and copper. You hear this on the news all the time. So it’s important to think through the many different factors influencing the underlying price. 

Another thing, just like in any investment, is the duration of your investment. 

The second is geopolitical factors. As we mentioned earlier, tariffs are a big factor. And oftentimes, a lot of these critical minerals and metals don’t come from just any country. It’s a big part of global trade. 

Many of the regions involved tend to be politically sensitive, which can affect both the production and investment of the underlying materials. Demand is also very sensitive—and it’s not uniform. Different countries have very different types of demand. 

So really thinking through 
– Where are the production regions? 
– Where are the demand regions? 
– What geopolitical factors are in play? 

These make the space more complicated, but also a very interesting investment. 

The third is environmental regulations. As the world moves toward a sustainability and energy transition economy, ESG factors become more important. However, the emphasis on ESG varies by region. There is both emphasis and de-emphasis happening right now. 

But directionally, that’s where we are headed. I think in general, there is very strong long-term demand for many of these critical minerals and metals. But because of all the other factors we talked about, there will be a lot of fluctuation in between. 

So really thinking through 
– What commodity fluctuation am I looking to get? 
– What are the geopolitical aspects, supply, and demand of this specific underlying metal? 
– What are the environmental factors? 
– What is the duration I’m willing to commit to this investment? 

I think those are some of the key factors to consider before investing. 

Cassidy Clement 

All of those right now are really culminating in the form of financial market news and commentary. I think, obviously, everybody knows what tariffs are doing in terms of consumer sentiment. 

People are really not sure what the headlines are going to look like the next day. They’re not really sure what color they’re going to see when it comes to the markets the next day. 

But with the current market news of tariffs, what are some things you think people should keep in mind in the coming months? 

Because as you and I had discussed prior to this call—just briefly brainstorming—new manufacturing cannot spring up overnight. The U.S. isn’t really known for having all the pieces of its manufacturing line in place, especially in terms of metals—both those being produced and those used in producing other things and machines. 

Jin Hennig 

What are some things you think listeners should keep an eye on or take into consideration in the coming months? 

Yeah, those are really good questions. And I actually think, in fact, they’re things our own government is struggling with—as well as a lot of companies and people. 

If you play these things right, I think we could have a good outcome. But if just one or two things in the whole supply chain don’t work out—because it’s so complex by nature—it could turn into a bit of a disaster. 

So I think one thing for sure is uncertainty. Uncertainty is really here to stay. And again, I think it’s really about the duration of investment you’re thinking through. 

A lot of these critical minerals and metals, in general, have a very positive long-term outlook—just because we’re going to be needing more of them to build infrastructure and support the energy transition economy. And that’s a fact. 

For example, right now in the United States, 4% of electricity is being used to power AI generative-related items. By 2030, that’s expected to grow to 10% of overall U.S. electricity. 

So, how are we thinking about powering this new economy? And if you’re thinking about that, how are we storing this power? How do we transport this power? 

That leads us to batteries, cables, and other infrastructure. For example, copper and aluminum are going to play very critical roles. 

So the demand is here to stay in the long term. If anything, it’s going to continue to grow. 

However, how these trade policies work out—what role tariffs are going to play—will vary depending on the metal you’re talking about. 

In order for this to work (and this is my personal opinion), the government needs to give corporates more assurance than just “the next four years.” Not many companies are going to invest based on a three-and-a-half-year outlook. 

They need long-term assurance. 

That said, there are also a lot of mines in the U.S.—and junior miners, as we talked about earlier—that are ready to go. Some have been in development for 14 or 15 years and are waiting on permits. 

Some of those mines could be operational within the next year. Some manufacturing could get to production in two to three years. 

Certainly, there are possibilities out there. But again, in general, if you are a commercially driven firm, you’re not going to make a decision based only on a 1–2 year outlook. You’re going to make a decision based on the long term. 

So having more stability around policies, and greater understanding around that, would be really critical for companies to make those investments—because these are not small investments. 

Cassidy Clement 

I couldn’t agree more. I think that’s an excellent point—to talk about it from the corporate perspective of how you’re going to look at your growth outlook, how you’re going to look at your company’s roadmap for the next decade, per se. 

Are you going to start shifting your manufacturing—from bringing together several pieces from other places—to now having to do everything domestically, or potentially in-house for some elements? 

Realistically, a lot of the semiconductor area—which is another podcast we have coming up—has had a lot of influence from the Pacific regions and Asia. That workforce was deriving its value from a specific dollar amount, but now, if you brought that back to U.S. shores, do you even have the workforce prepared for it? 

Do we have the metals prepared for it? All of those elements—it’s a really good point. 

That kind of leads me to my next question—I know you were at a conference recently. Were there any new trends, interesting topics, or notes on market fluctuations that you found interesting, or something you’re going to be looking at in the future? 

Jin Hennig 

Sure. I was recently in Singapore last week for Cobalt Congress, which is really the cobalt-driven industry gathering. And then I also attended the IWCC—International Wrought Copper Council—which is really focused around copper. 

The common theme again is the long-term outlook demand is looking strong, especially around copper. 

But ESG was definitely a topic—in terms of, how do you make things more sustainable? How do you think about environmental controls around this? That was another one of the big factors. 

To your earlier point about semiconductors and other things, I think where the U.S. will play a good role is in value-added manufacturing. I think we’re past the era of heavy manufacturing. 

One of the conversations we heard a lot about, regarding potentially moving production to the U.S., is that we don’t have the workforce. Even if they built a plant somewhere in the United States, do we have enough of a workforce that’s willing to work in these factories? 

So I think one of the points that was brought up is, yes, U.S. manufacturing could happen—but it would have to be more of that high-value, semiconductor-type of business. There was also talk about the reshoring aspect of it—because, given that 60–70+% of the semiconductor business right now is based out of China, how do we align some of those operations more safely through maybe Korea or Japan, and then build partnerships with more geopolitically friendly regions, to bring those investments into the United States? 

So certainly, I think it’s going to be a very interesting next two to three years to see how all of this pans out. 

But before that, we have to solve the tariff issues first—because right now, there’s just a lot of volatility due to the uncertainties around tariffs. So we’ve got to figure that portion out. 

I would say the conversation was really around supply and demand, tariffs in the U.S., what all of this means, and then the reshoring of some of these supply chains moving forward—and the possibilities around that. 

Cassidy Clement 

There’s definitely going to be some reshuffling. And as you said, we don’t really know how this story ends. It’s about a two- to three-year-long adventure for all of us, so we’re not totally sure. But thanks for joining us today, Jin. You brought up some great points. 

Jin Hennig 

Thank you. Thanks for having me, Cassidy. 

Cassidy Clement 

Sure, of course. As always, listeners can learn more about an array of financial topics for free at interactivebrokers.com/campus. Follow us on your favorite podcast network, and feel free to give us a rating or review. Thanks for listening, everyone.