Investing in Rare Earths: Opportunities and Risks
Investing in rare earths can be of interest to investors, as these metals play a central role in many forward-looking technologies such as e-mobility and renewable energies. Despite the preliminary agreement in the US-China trade dispute, the supply of rare earths remains uncertain, which presents opportunities for investors. Here are some options for investing in rare earths:
Stocks
- Lynas Rare Earths: Lynas is an Australian mining company specializing in the exploration, development, mining, and processing of rare earths. The stock has experienced strong price movements in the past and could remain attractive to investors.
- MP Materials: MP Materials is the largest Western company in the rare earth sector and produces rare earth concentrate as well as refined rare earth oxides. With a market capitalization of about $5 billion, it is a significant player in the industry.
- Jl Mag Rare Earth: The Chinese producer Jl Mag Rare Earth recently received approval for the export of rare earths, leading to a rise in stock prices. This could be an interesting investment for investors betting on the Chinese economy.
ETFs
- VanEck Rare Earth and Strategic Metals ETF (REMX): This ETF invests in companies that generate at least 50% of their revenues from rare earths or strategic metals. It offers broad diversification across various producers and refineries.
- ETFs on Disruptive Materials: These ETFs focus on raw materials that play a role in forward-looking areas such as e-mobility or renewable energies. They provide a way to invest in a portfolio of mining and materials companies.
- ETFs on Essential Metals: These ETFs concentrate on metals that are essential for critical sectors of the economy, including rare earths. Companies like Anglo American and Freeport-McMoRan are represented in these ETFs.
Opportunities and Risks
- Opportunities: The increasing demand for rare earths due to their role in forward-looking technologies offers investors the chance to benefit from market developments.
- Risks: Geopolitical tensions, particularly between the USA and China, can affect the supply of rare earths and lead to price fluctuations. Additionally, macroeconomic factors such as a global economic downturn and aggressive monetary policy can negatively impact the performance of stocks and ETFs in the rare earth sector.