Rare Earth Metals: A Treasure Trove for Investors.

REEs are being scrutinized not just on their economic but environmental merit. Mining companies such as Molycorp and MP Materials are seeking to secure supplies of rare earth elements outside China for themselves.

Excavating, processing, and refining these metals present difficult technical and environmental hurdles that will inevitably impede global demand for technologies that rely on them.

Supply

REEs are found throughout Earth's crust but usually occur only in concentrated deposits that require significant energy and cost to extract. Furthermore, REEs can be difficult to separate and must often be combined with other elements in order to be processed into usable materials.

As a result, rare earth metal production and processing is concentrated among a few countries; China being the leading supplier. China holds over 80% of global REE production (USGS 2021). China restricts exports in order to maintain domestic supplies while also purchasing overseas companies to gain even greater control. This creates an imbalanced supply which has resulted in political tensions regarding REEs.

REEs have always been in high demand, and that trend is expected to intensify over the coming decade due to increasing use in hybrid vehicles, electric power generation systems and other green technologies. Price fluctuations for REEs may increase. To profit from rising REE prices investors may wish to invest in companies producing or processing these materials (exchange-traded funds or mutual funds such as VanEck Vectors Rare Earth/Strategic Metals ETF REMX are available that invest directly).

Rare earth minerals not only find strategic military uses but have numerous commercial applications as well. Lanthanum helps increase oil refining efficiency while praseodymium strengthens magnets used in hybrid cars and wind turbines. With the introduction of mobile communications via iPhone in 2008 - using metals such as neodymium and erbium fiber optic cables to transmit high-speed signals over long distances without incurring costly long distance calls; as well as transport global data around the globe more cost efficiently via wireless technologies like WIMA - rare earth minerals have found many uses commercial applications as well. Lanthanum enhances oil refining efficiency; and praseodymium helps make magnets stronger for hybrid cars and wind turbines; both applications depend on metals such as Neodymium which improve oil refining efficiency; both metals help refine oil refining efficiency, while their use was made famous through iPhone's debut which depended heavily upon neodymium for electric transmission/receive signals via fiber-optic cables to reduce cost for long distance calls/carry internet data around the globe.

The United States has attempted to regain its position as a world leader in REE markets through increased efforts by President Biden and his administration, such as green technology development and climate change mitigation initiatives. But developing an affordable REE supply chain may take at least 10 years; such infrastructure investment would involve building mining and processing facilities and significantly lessening Chinese suppliers as sources.

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Demand

Rare Earth Metal demand worldwide has been steadily increasing since 2012 and projections indicate this will only get worse over time. This poses serious supply inequities and price fluctuations for key industries including high-powered magnets used for electronics production, clean energy technologies and national security applications.

At one time, the United States enjoyed near monopoly status in producing and exporting Rare Earth Metals (REEs). But that began to shift significantly beginning in the late 80s as U.S companies moved their factories overseas for lower labor costs and less stringent environmental regulations in China. Meanwhile Chinese factories ramped up production to meet rising demand, eventually controlling 80% of world REE production over 20 years.

Since 2010, the world has experienced several geopolitical disruptions that have severely disrupted supply chains and driven prices upward. Japan-China tensions over disputed waters led to China imposing an embargo on rare earth oxide shipments necessary for Japanese high-tech manufacturing - leading to an unexpected spike in REE prices.

As a result of this imbalance, UN consuming nations have taken steps to diversify their supply sources and decrease reliance on China; however, these efforts have proven difficult and time is running out.

There are investments that could provide a solution to this challenge, however. One option is investing in companies that mine and process rare earth metals (REMs). MP Materials Corp and Rare Element Resources in the US as well as Lynas Rare Earths in Australia are good examples. Although not risk free, such investments offer diversification as well as exposure to this growing industry.

An alternative strategy would be to invest in rare earth recycling companies. Companies like Metal Tech Recycling Corporation and American Resources Corp in the US and Geomega Resources in Canada offer this service, turning rare earth elements back into useful raw material that will protect you against future disruptions.

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Prices

Investment in rare earth metals can be profitable, yet comes with its own set of risks that are specific to emerging markets and industries. Before making any commitments in this sector, investors should carefully assess both its benefits and risks before including them as part of their portfolios.

Although rare earth elements are growing increasingly popular, their overall commodity market share remains small. Therefore, REO prices can often fluctuate significantly; when making investment decisions involving REOs investors should take this volatility into account.

Investors looking to diversify their holdings in the rare earth sector should seek companies that prioritize sustainable growth. Many of these firms are developing technologies to enhance mining and processing of rare earth minerals, creating lasting value for investors.

The United States stands to become a world leader in rare earth mining and production due to its vast mineral reserves, but building an effective supply chain will prove challenging; domestic costs will likely surpass global norms, while extracting and producing process may take decades for completion.

China currently leads the rare earth industry and this success was no accident. Under Deng Xiaoping's communist regime in China in the 1970s, manufacturing and global trade capabilities were developed as part of an attempt to ensure political stability and domestic prosperity - including developing rare earth element production that propelled China into global manufacturing powerhouse status.

Although the United States boasts the largest REO reserve, they do not produce them themselves and instead import over half their needed REO supplies every year from other sources.

REOs remain an appealing investment opportunity; however, due to limited production in China and lengthy timeframes associated with new REO production lines coming online. Thus, REO prices may increase in future; investors should seek opportunities that can diversify their holdings within this volatile sector in order to minimize exposure.

Risks

Rare earth metals may not make headlines on Wall Street, but they remain key elements in both existing and emerging technologies. Unfortunately, however, there simply aren't enough of them around to go around. Rare earth elements - comprising scandium, lanthanum, cerium, praseodymium neodymium promethium samarium terbium gadolinium and yttrium - are found across various types of rocks worldwide in various concentrations within various igneous, metamorphic and sedimentary formations; their extraction produces toxic byproducts such as radioactive waste that must be carefully managed; mining has environmental implications as well.

As such, their price volatility can have devastating repercussions for industries that rely on them - and investors need to be aware of all possible supply chain risks so that they can mitigate them through diversification strategies.

Investors should also keep political considerations surrounding REEs in mind when investing in them. China has increasingly used REEs to exert leverage during trade talks with the U.S.; their lack of domestic production limits exports resulting in market imbalance that may persist even as U.S. companies expand capacity in China. Yet experts agree that REEs remain vital to global security.

That is why some mining companies are taking an inclusive approach to extracting minerals, looking for novel means of extraction. One example is California project that seeks to extract elements from coal ash produced by power plants. Researchers are exploring whether seawater could also provide sources of such elements and the radioactive waste products left by thorium nuclear reactors can also help.

Finaly, the REEs depend on consumers and manufacturers' willingness to pay more for ethically produced materials and the mechanisms within and without governments that ensure these standards are enforced. With global EV demand projected to double by 2040, now is the time for action; investors should examine their portfolios for any REE exposure and consider adding or replacing it with other investments.