Investment in rare earth metals can provide another asset to diversify a financial portfolio, though this type of investment entails specific risks.
REEs are 17 metallic members of the periodic table that play an essential role in many high-tech applications, including cell phones, computer hard drives and flat-screen TVs.
Imagine a world in which your smart phone fails, the lights dim in your home, and your car won't start. Such is one possible result of a global shortage of rare earth elements (REEs). REEs are vital components in modern technologies - miniaturizing them while improving green, medical, and high-tech applications; additionally they possess unique magnetic, phosphorescent, and catalytic properties that enable miniaturization as well as magnetic, phosphorescent, and catalytic capabilities.
Rare earths are key components in today's cutting-edge products ranging from mobile communication standards such as 5G mobile communication standards and modern X-ray equipment, to renewable energy sources like wind farms. Without them, technology would never advance.
Demand for these key metals is projected to skyrocket over the coming years due to several factors. Electric vehicles will become increasingly popular, necessitating batteries containing rare earth elements (REE). Furthermore, REEs have become essential components in many other fields including telecomm, green energy and military technology.
Investors have multiple avenues available to them when it comes to accessing the rare earths market. One way is through mining company shares, available via ETFs or index certificates; direct investments in physical oxides is also an option if handled carefully with experienced storage providers such as Swiss Gold Safe who offer segregated storage in Switzerland ensuring investors will be able to retrieve exactly the REEs that were consigned for storage at any one time.
As with any investment, rare earths should be approached with caution due to their associated risks. China holds nearly monopoly over REE production; even Lynas (ASX:LYC; OTC Pink:LYSCF), one of the major producers not located within China sends their mined materials directly back there for refining and this could result in supply chain instability if trade wars arise between US and China.
http://chinese.wsj.com/gb/20101008/rec151012.asp?source=MoreInSec
Imagine all three of your electronics - smartphone, laptop and television - stopped functioning simultaneously, as well as your car not starting. Such an event would not only be inconvenient but potentially dangerous due to modern technology's dependence on rare earth metals for operation.
Rare Earth Elements (REEs) are essential components of many electronic, optical, magnetic and catalytic applications - even being called "technology metals".
REEs are found throughout nature, yet are rarely present in high concentrations in Earth's crust or alone. Mining these metals requires complex and risky extraction methods that produce hazardous waste while necessitating sophisticated technology for extraction from their natural environments.
Mining companies engaged in rare earth metals face significant financial risks. Their revenue streams depend heavily on global demand for the metals and pricing of REE raw materials; any decrease in global demand could see REE sales and stock prices tank; oversupply caused by producers overestimating future demand can similarly cause drop-off in spot prices.
Even with high risk and lengthy lead times, this sector offers investors opportunities. Companies producing REEs are already reaping the rewards of an expanding market that's projected to continue growing over time; particularly with regards to electric vehicle demand increasing significantly over time.
Australian rare earth stocks could play an essential role in meeting global demand for sophisticated yet eco-friendly technology, providing much-needed supply of these rare earth elements.
ASX rare earth stocks cover those involved with exploration, mining, production, refining or distribution of REEs and related products. Recycling REEs is also becoming an increasing business as more electronics reach the end of their lifespans and are dismantled for raw materials; Lynas (ASX:LYC; OTC Pink:LYSCF), Molycorp (NYSE:MOL) and Northern Minerals (ASX:NTU) are three companies actively in this space; hard rock REE miners from 2000s have yet to enter production; these junior producers have made investments that position them as alternatives supply options to China compared with hard rock REE miners of today who still need time before entering production - unlike hard rock miners of 2000s that still need time before entering production.
Investment in rare earth stocks comes with various risks. One such risk is their inherent volatility; due in part to supply and demand dynamics as well as China's influence, which can significantly skew prices.
Environmental risks related to rare earths mining and production should also be carefully considered. Mining rare earths involves large amounts of toxic waste and water pollution, leading to regulatory action, public opposition and reputational damage for companies involved. Rare earths mining also can have negative social repercussions such as displacement of local populations.
ASX rare earths stocks remain at an early stage of development and as such face significant financial risk. Even when funding has been secured to complete their project, unexpected cost blow-outs or reduced reserves or grades could drastically diminish profitability for any given business.
As with most commodities, rare earths' supply chain can be complex, leaving them susceptible to sudden shifts in demand and pricing. This is especially true of stocks as any single country's export restrictions could influence global prices in a dramatic way - for instance China enacting an export ban to protect domestic manufacturing sent prices soaring and led Japan, US, and other nations to file complaints with the World Trade Organization over price increase issues.
Investors seeking exposure to rare earths should look toward clay hosted deposits like MP Materials' Mountain Pass REE deposit in West Virginia - it is the largest and highest quality REE deposit globally with its own processing plant - especially as this deposit contains dysprosium and terbium which are critical components for strong permanent magnets - such as those found in iPhone magnets - that withstand higher temperatures allowing electric vehicles travel further with one charge.
As more countries turn toward green technology, demand for rare earth elements will only continue to increase. These metals are essential in producing hybrid and electric vehicles, solar panels, wind turbines and many other green technologies - leading to rising prices that provide investors with an opportunity for profits by investing in companies producing or distributing these metals.
Be mindful before investing in ASX rare earths stocks; rare earths can be difficult and expensive to extract and refine, leading to price volatility and potentially risky investments for those unprepared for its ups and downs.
As commodities, rare earths are highly vulnerable to political events and political restrictions on exports by nations around the world. When China significantly restricted rare earth exports in 2010 in order to ensure sufficient supply for domestic manufacturing purposes, panic buying ensued and prices skyrocketed causing United States, Japan and European governments to file complaints with the World Trade Organization regarding this sudden price increase.
Investing in rare earths requires choosing a reliable company with experienced management teams and solid business plans, low fees and transparent disclosures, storage requirements due to their high value density as well as professional storage with insurance cover, etc.
For an effortless and risk-free way of investing in rare earths, robo-advisor ESG portfolios could be the ideal solution. These digital platforms use predetermined algorithms to invest your funds on your behalf; Betterment and Wealthfront both offer them. Robo-advisors boast low costs, lower volatility and transparency - perfect for meeting all of your investment needs!