Investing intelligently with rare earths and rare metals

The 17 rare earths seem particularly profitable, given their properties. But it should be stressed at the outset that investing in these materials presents a certain risk. Indeed, unlike other assets, rare earth trading is not (yet) subject to a specific structuring. These are not associated with a dedicated market.

In addition, unlike some key assets such as oil or gold, the rare earth market is not associated with regulation at either the stock exchange or state level. For the time being, the market is mainly private and it brings together professionals. As for regulation, it is exclusively governed by supply and demand. In any case, it is important to know that there are still possible solutions for those who are really interested..

The value of rare metals

As for prices, they are disclosed by the world’s leading rare metal mines, including those based in China, a country with a monopoly in this area. As for the sale itself, it is done in batches. Rare earths are then marketed in the form of oxide or metal, but always with almost perfect purity (nearly 99%). The less pure they are, the less valiant they are.

Knowing the production of rare earths

To invest intelligently in rare earths, it is important to be well informed on the subject. As with any investment, it is essential to know the assets you are going to trade, while keeping a close eye on the latest news. Today, the leading producer of strategic metals is China, which accounts for about 97% of world production. This is quite paradoxical when you consider that the country has “only” almost a third of the world’s reserves. For comparison, the United States has 1/10th against 1/6th and nearly 5% for Russia and Australia.

rare earth production

Initially, China supplied nearly 100,000 tonnes annually. However, the country took a decision in 2010 and reduced its production by nearly 65%, exporting only 35,000 tonnes. This decision was accompanied by a real enthusiasm for rare earths. Stock markets soon caught fire. Within a few weeks, some rare metals have seen their prices multiply by 2.5.

When investing in rare earths, it is important to know that these minerals are divided into two sub-categories. On the one hand, heavy rare earths and, on the other hand, light ones. The former are rarer than the latter. Logically, they are a little more interesting in terms of trading.

The use of rare earths

Although they have similar properties, the use of rare earths differs according to the ore concerned. What interests the investor is the attractiveness of the investor’s presence. The rule is simple: the more a strategic metal is used and demanded, the more likely it is that its price will change positively (knowing that the opposite is also true).

And not all rare earths are of the same interest. For example, terbium, yttrium and europium are not likely to be in short supply. These metals are mainly used for the production of fluorescent lamps, the latter being gradually abandoned in favour of LED lamps. The same is true for light rare earths, whose reserves are quite abundant. Although used to manufacture components for smartphones and other high-tech objects, these rare earths are abundant enough not to be in short supply.

rare earth sample

The situation is quite different for the rarer metals, which are also widely used in various fields. These include dysprosium and neodymium, which are in high demand in the production of magnets for wind turbines, batteries (for green cars) and hard disks, among others. Nevertheless, it should be stressed that, despite the relative risk of shortages, manufacturers are looking for other alternatives, in particular replacement by other materials, recycling, but also the exploration of new supply countries.

So how can we invest in rare earths?

rare earths from JapanEven if it is quite complicated and risky, investment in rare earths is still possible and the risk may well be worth it. And although, as mentioned above, the market remains quite confidential for strategic minerals, various solutions are possible.

First, investors can acquire shares of mining companies knowing that it is a long-term formula. There are investment funds or SICAVs specializing in rare metals that can be found with most online brokers. Then, for those looking for a short-term solution, there is the option of trackers or ETFs such as REMX and rare earth indices. Here, the disadvantage is that these instruments are not necessarily linked to an underlying physical asset: the risk is therefore higher.

Finally, there is also the possibility of becoming an owner of rare earths and metals. In this case, it is a broker who takes care of the various steps necessary for the transaction: he takes care of the purchase, storage and eventual resale. It will then have to be priced, in general, brokers accept the mission for a minimum transaction of 5,000 euros.

In any case, it is wise to always conduct the investigation with any decision being made, ensuring that a truly profitable investment is made. For investors considering buying physical rare metals, it is strongly recommended to turn to a regulated and trustworthy broker offering good quality rare earths and ensuring storage under the best conditions.

What future for rare earths?

Above all, it should be recalled that the rare earths market experienced a real boom in 2011, following China’s decision to limit its exports. Today, the question is whether this rapid change could happen again in the coming years. Many experts agree that this is rather unlikely. This would only be possible if China further restricted its exports, which is unlikely to happen.

In addition, if the Chinese authorities take a decision in this direction, there has been an increase in recent years in the illegal export of rare earths and strategic metals outside China. Moreover, according to the local government, nearly a third of exports in this area take an illegal route. So, assuming specific Beijing decisions, prices will probably not take off as in 2011, but just a bullish trend.

rare earth mine

In any case, if we consider the medium term, we should still see a slight increase in mineral prices, especially for heavy rare earths. Indeed, even if industries are looking for various solutions to avoid being dependent on strategic metals, the solutions to replace and recycle them are not yet fully developed.

As a result, rare metals remain indispensable in many fields. In addition, the fact that the price of rare earths has a chance to rebound should lead to the establishment and implementation of various projects to exploit these minerals, especially outside Chinese territory. In this way, the supply would increase and it would then be easier to control the prices.

So? To invest or not in rare metals? Under what conditions?

rare earthsIt is important to remain objective with respect to rare earths. Many investors are rushing to invest, motivated by the scarcity of an ore that is not as rare as it seems. And even if the prospects for the future are quite encouraging, it is clear that investing in strategic metals is not a great business opportunity, at least not for the time being. There are many reasons for this. First, the market is difficult for investors to access, as China has a monopoly.

As far as producers based outside China (particularly those based in Europe) are concerned, their situation is still quite delicate and does not motivate investment. And even if these producers have a chance to evolve, it is not advisable to use this as a basis for making an investment decision, as the risk of a decline is obvious and uncontrollable. Finally, there is the fact that the global economy also remains quite fragile. If stronger assets (notably gold or oil) have difficulty resisting economic pressure, rare earths are not likely to deviate from the rule… In conclusion, the time remains for caution.

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