The race to strengthen the manufacturing and refining supply chain for rare earth elements outside of China is underway, offering investment opportunities.
The so-called “rare earths” (Ree), are a group of 17 elements, belonging to the category of soft heavy metals. Compounds containing rare earths are used in a variety of electrical and electronic applications, lasers, glass, magnetic materials and industrial processes. Furthermore, as used in wind turbines and electric vehicles, these elements are also fundamental for the transition of nations to a greener economy. The correlation of these materials with cleaner energy implies that - most likely - the increase in their demand in the future will be inexorable.
Historically the United States has been a leader in the production of rare earths, but nowadays the monopoly has passed into the hands of China, which is able to offer lower prices based on lower labor costs and lower environmental standards. Therefore, global refining and manufacturing is dependent on imports from this Asian nation.
Risks deriving from investments in rare earths
Before delving into ways to invest in rare earth elements, investors should keep in mind that these metals are commodities, which means they are very volatile, as they are subject to highs and lows of demand due to business cycles, therefore this results in unstable income and earnings.
At the moment, it is not possible to buy rare earths directly, nor to resort to futures for rare earth elements, as it is possible to do with other commodities such as gold, copper, wheat or corn. So investors could seek exposure to the rare earth sector using more conventional means.
Investing in rare earth mining stocks: the importance of China
No list of ways to invest in rare earth mining would be complete without mentioning China. China Northern Rare Earth Group High-Tech Co. is the company that extracts from the largest rare earth deposit in the world, located in the Inner Mongolia region. Other publicly traded Chinese companies involved in the rare earth industry include China Minmetals Rare Earth Co., Rising Nonferrous Metals Share Co., and Xiamen Tungsten Co.
The list of publicly traded companies that mine rare earth elements outside of China is limited. One of the largest among them is Lynas Rare Earths (Lyscf), based in Malaysia, which extracts rare earth elements from its high-quality mine in Australia and also processes rare earth minerals.
As for the United States, the only company that extracts and processes rare earth elements is MP Materials Corp. (MP), which operates the Mountain Pass mine in California. From the 1960s through the mid-1980s, that mine made the United States the world’s largest producer of rare earth elements.
Investing in rare earths: the option of funds
Investors who don’t want to choose individual stocks can choose from a couple of options when it comes to rare earth funds.
The best known and most accessible is the VanEck Vectors Rare Earth/Strategic Metals ETF (Remx). This traded fund also contains cobalt, molybdenum, titanium and lithium stocks and offers exposure to rare earth operators, including China Northern Rare Earth Group and Lynas Rare Earths.
Another important and well-known fund is Dolefin Rare Earth Elements Fund, a Swiss mutual fund which invests in shares of rare earth element companies. This fund also includes platinum producers, as well as rare earth producers.
Rare earths, among the most critical materials, are ideal candidates for investing in recycling companies
By moving to the other end of the supply chain, investors can consider rare earth recyclers.
Very difficult to replace, essential for new information technologies and the energy transition, subject to geopolitical pressures, rare earths are classified by the European Union as one of the most critical materials. As such, they are an ideal candidate for recycling.
However, this process is not simple: it is very difficult to evaluate the quantities of rare earths contained in existing products. There are studies aimed at determining the quantities of waste produced on European soil and, therefore, at evaluating the quantities of potentially recyclable materials.
The main rare earth recycling companies are, alphabetically: Energy Fuels, Inc. (United States), Global Tungsten & Powders Corp. (United States), Hitachi Metals, Ltd. (Japan), Osram Licht AG (Germany), REEcycle Inc. (United States), Solvay SA (Belgium), Umicore (Belgium) among others.
The rare earth industry and growth prospects
Between strategic and environmental concerns, the rare earth industry outside of China has plenty of room to grow, offering investors investment opportunities at different stages of the rare earth supply chain. As pointed out, these minerals are extremely subject to geopolitical conditions, if you want to stay informed on the latest market news, we suggest you visit this link.
Original article published on Money.it Italy 2022-10-14 10:30:00.
Original title: Tre modi per investire in azioni di terre rare
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