The Indispensable Raw Material: Rare Earths
Rare earths are essential for modern technologies: they are used in smartphones, electric cars, semiconductors, and the defense industry. They are particularly important for the production of highly specialized magnets, such as those found in planes or the F-35 fighter jet. Despite a preliminary agreement in the US-China trade dispute, the supply situation remains tense — China is the world’s largest producer and exporter of rare earths. China’s recent commitment to temporarily restore export licenses does provide some short-term relief, but it still carries risks due to potential renewed escalations.
Investment Opportunities in Rare Earths
Stocks
- Lynas Rare Earths Ltd. Lynas is one of the largest producers outside China with significant mines in Australia and Malaysia. The company benefits from the efforts of Western countries to become less dependent on Chinese supplies.
- MP Materials Corp. MP Materials operates the only active rare earth mine in the USA (Mountain Pass) and plays a central role in supplying the American market.
- China Northern Rare Earth Group As a leading Chinese provider, the company directly benefits from government incentive programs and a strong domestic market.
These stocks offer direct exposure to the mining and processing of rare earths.
ETFs
| ETF Name / ISIN | TER | Focus / Top Positions |
|---|---|---|
| VanEck Rare Earth and Strategic Metals ETF (REMX) | ~0.55% | Invests at least half in companies generating revenue from rare earths; Top Position: Lynas Rare Earths Ltd., MP Materials Corp., China Northern Rare Earth Group |
| Disruptive Materials ETF (IE000FP52WM7) | 0.50% | Focus on materials for e-mobility & renewables; high China weighting |
| Essential Metals ETF (IE000ROSD5J6) | 0.55% | Metals such as copper & rare earths; Top Position: Anglo American PLC, Freeport McMoRan Inc., BHP Group Ltd. |
Opportunities & Risks
Opportunities
- Growing Demand: Due to electromobility, renewable energies, and high technology, demand for rare earths is continuously increasing.
- Geopolitical Diversification: Western countries are increasingly investing in their own supply chains to reduce dependence on China.
- Technological Innovation: New application areas such as wind power plants or battery technologies further drive demand.
Risks
- Geopolitical Tensions: Trade conflicts between the USA and China can flare up again at any time and lead to supply shortages.
- Market Volatility: Prices for rare earths fluctuate significantly.
- Oversupply & Economic Risk: A global economic slowdown or overproduction could lead to price declines.
- Regulatory Interventions: Government regulations can pose both opportunities and risks.
Conclusion
Investments in rare earths offer attractive growth opportunities due to technological advancement and geopolitical developments.