The Growing Significance of Rare Earth Elements in the Investment Aren

Rare earth metals may seem rare; according to the US Geological Survey they're actually quite abundant throughout Earth's crust. Companies use chemical processing such as solvent extraction in order to separate these minerals from others and extract the rarer ones for use in products like jewelry and electronics.

Investment in the rare earths industry remains risky. Our experts propose radical alternatives, including creating a public repository of processed rare earths.

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Mining

Rare earth elements are an indispensable component of high-tech equipment ranging from Apple headphones to General Electric wind turbines, green technologies such as hybrid and electric vehicles and even military hardware such as jet fighters and missile guidance systems. Their role is undeniably crucial, making investing in companies producing or processing rare earth minerals an intelligent decision.

Mining rare earths is not without its risks. Mining wastewater can pollute soil and groundwater supplies while solid waste may contain radioactive elements; additionally, extraction requires specialist machinery. Due to these concerns, many experts view recycling and reuse as the future of rare earth mining.

Investors in companies that recycle rare earth metals may benefit from increasing demand and potentially mitigate supply disruption risks, while being aware that this market remains relatively new - meaning these stocks may trade with wide bid-ask spreads, making them more volatile than their counterparts.

Addition of REEs can be complex. Before investing, investors should conduct extensive research on each potential REE company and be ready for potential significant losses upon selling shares if REE prices decline significantly.

China is currently the leading producer and distributor of rare earth metals, and Beijing wishes to maintain control over their pricing. To accomplish this goal, Beijing is consolidating the industry through mergers and acquisitions as well as setting export quotas; both policies could increase Chinese control of rare earth prices as well as give Beijing an advantage when negotiating with foreign buyers.

China has attempted to regulate rare earth production through various means; but America has successfully counteracted some of this attempt through supporting technological development that allows separation and recycling of rare earths. One such effort involves work at Ames Laboratory of Oak Ridge National Lab which utilizes chemical processes that separate rare earth components commonly combined together in permanent magnets, such as neodymium and dysprosium.

Stocks

As rare earth elements became more widely used, governments and investors began to worry that shortages may arise. To combat this fear, governments and investors devised many bold solutions - from opening up Amazon rainforests for mining operations, mining for materials on Earth itself or even mining off Moon - though many never came true. While such plans should not be taken literally when investing in rare earth elements.

Investment opportunities in the rare earth element industry should focus on companies that mine or process these materials, according to our experts Jack Lifton and Jon Hykawy. However, they remain wary about government interventions in this sector.

One reason is that the current trade war could threaten to disrupt stable supplies of raw materials. China, specifically, has used tariffs as leverage over rare earth mineral production. Lifton and Hykawy both believe the conflict can be resolved eventually.

Rare earths processing plants are susceptible to supply chain disruptions due to both political instability and natural disasters, with both types of events having devastating impacts on rare earth processing facilities. Supply interruptions have typically occurred because of natural disasters; however, unanticipated events can also cause disruptions. For instance, in 2010, an international dispute between Japan and China regarding waters claimed by both nations led Chinese customs agents to stop REE oxide shipments which disrupted supply of Japanese high-tech manufacturers, driving up prices significantly higher.

Rare earth metals producers should take steps to build more resilient processes in order to minimize disruptions from disruptions in supply. One effective approach would be reducing pollution produced during mining, refining, and smelting; by switching over to more sustainable production methods as well as recycling materials efficiently.

Some companies are investing in technology that will enable them to produce rare earth elements more efficiently, whether that means cutting energy costs or employing advanced processing techniques. Rare earths producers can pass along these savings directly to consumers and manufacturers while simultaneously decreasing overall production costs.

ETFs

ETFs have quickly become an attractive investment vehicle among investors as an effective way to gain market exposures. Tracking various market indices, ETFs can be used to diversify portfolios by investing in stocks, bonds or physical commodities like gold. Their popularity has skyrocketed as more people recognize the advantages they can bring their portfolio.

According to our 2019 investor survey, 95% of those responding stated they use ETFs for traditional asset classes such as stocks (90%), commodities (77%), and government bonds (68%). With new market segments emerging such as REEs (59%), people have turned increasingly toward using ETFs as non-traditional investments using them for these non-traditional assets as well.

Investment in rare earth metals is highly risky and returns can be extremely unpredictable. Yet some industry experts see an opportunity for rare earth ETFs. Jon Hykawy, senior director of global ETFs at BlackRock explains that an ETF backed by processed rare earth metals would give financial institutions confidence when funding new mining ventures. Alternatively, Canada and the EU might collaborate by managing processing while one provides raw materials.

Jack Lifton, founder of the REE Research Institute, also believes the industry is at an inflection point. He anticipates electric vehicles creating strong demand for REEs and technological advances such as better computer processors and LCD screens having increased REE needs.

Investors considering rare earth ETFs should exercise great caution when making their purchase decision, including reviewing investment objectives, fees and expenses as well as its underlying index. It's also vital that investors fully comprehend the process of ETF creation and redemption as this can cause deviations between share price on an exchange and net asset value of the ETF - for instance if an index rises or falls by certain amounts then the ETF must purchase or sell assets to maintain its NAV.

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Recyclers

Rare earth elements play an essential role in many products from Apple AirPods and iPhones to General Electric wind turbine motors, Philips scanners, medical tools and F-35 jet fighters. Although they only account for a tiny percentage of materials used to create these devices, their high melting points and magnetic properties often make them an essential component; hence their designation as "technology metals."

Concerns have been expressed over China's dominance in producing rare earth minerals; as its president has hinted that they could use this as leverage during trade talks between our two countries and any disruption could have serious repercussions for clean energy development on both sides.

At a time when prices spiked due to supply shortages, companies that relied on rare earth elements found ways to cut back. Oil refineries stopped using rare earth element lanthanum which improves refining efficiency; glassmakers switched to cheaper options which don't rely on rare earth element cerium for polishing purposes.

Our two experts propose several innovative solutions, from forgoing rare earth minerals altogether to recycling rare earths that have already been mined and separated from other materials. Mining operations often produce toxic waste that must be safely disposed of while mining itself can be expensive and time consuming.

Jon Hykawy, PhD Physicist with Byron Capital Markets and one of our contributors, suggests that recycled materials could become cost-competitive with those mined from mines; furthermore, their environmental friendliness might even lead to consumers willing to pay more.

Professor Jack Lifton from the University of Utah warns, however, that such projects may be challenging to launch. Establishing a production facility requires considerable financial investments, while licensing can often take years for US and UK production companies. Without guaranteed contracts from major consumers such as DoD contracts it's unlikely any new ventures will survive.