Why Investing in Rare Earth Elements is a Smart Move

Demand for rare earth elements continues to increase rapidly. Used extensively in electric vehicles, flat panels and consumer electronics devices - not to mention their essential role in clean energy generation - these elements also play a critical role in clean energy generation.

However, rare earth supply is uncertain; China's strict control over production and export quotas could result in instability for this market segment.

1. They are essential for the future of technology

Rare Earth Elements (REMs) are an array of 17 metals with special magnetic and optical properties that have wide-ranging high-tech applications. This group comprises elements such as Neodymium, Praseodymium, Dysprosium, Cerium Lanthanum Gallium which play key roles in creating devices such as smartphones cameras hard disks fluorescent LED lighting flat screen TV batteries defense technology wind turbines as well as green energy technologies like wind power. They're essential in energy-efficient technologies like Wind Power.

Rare earths may not be as rare as their name implies, yet extracting and processing them remains a complex endeavor. Found jumbled together in natural deposits, they require sophisticated equipment to separate. Once extracted, rare earths can be refined into products such as magnetic materials, lasers, high-purity catalysts, nuclear fuels and magnetic resonance imaging (MRI).

As more countries turn away from fossil fuels and toward clean energy sources, rare earth elements (REEs) have seen increased demand. Electric vehicles require magnets made of neodymium and dysprosium - driving growth in battery production which in turn requires REEs. Furthermore, wind farms are increasing wind farm usage which drives demand for metals used in their manufacture.

China is the dominant producer and user of rare earths, accounting for approximately 80% of global supply. China can wield this power geopolitically; for instance in 2010 when they cut Japan off access to rare earths amid their dispute over islands called Senkaku by Japan and Diaoyu by China - this threat spurring Western companies to diversify their supply chains in order to reduce dependency on China.

Companies such as MP Materials have developed technologies to mine rare earths in the US, giving them an advantage in competing with global suppliers as a source of essential resources like rare earth minerals. Their sales and profits have seen steady increases year over year and revenue is expected to hit $1 billion by 2022 - providing another example of investing in rare earth mineral companies can lead to long-term sustainable business ventures.

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2. They are a safe investment

Rare earth elements are essential components for many industries, from green technology like General Electric wind turbines and Tesla electric cars, medical tools like Philips Healthcare scanners, to military hardware like F-35 jet fighters. President Trump even included them among the minerals essential to America's economy and national security; recently exempting them from his $300 billion tariffs on Chinese goods.

Though their name implies otherwise, rare earth elements aren't actually all that scarce compared to what one might assume from their name alone. Indeed, cerium ranks 25th most abundant element at 68 parts per million (making it as abundant as copper!). Unfortunately due to being dispersed rather than concentrated they require expensive and time-intensive mining operations in order to extract their precious metal content and thus have earned themselves the moniker "rare."

China has become the largest producer of rare earth elements, but they don't come exclusively from that source. Companies across Australia, Brazil, India, Kazakhstan, Malaysia, Russia South Africa and the US all extract and refine significant quantities of these metals as well.

As companies across the world move away from fossil fuels and towards greener solutions, their demand for rare earth elements will only increase - now is an opportune time to invest in them!

There are various strategies for investing in rare earth elements, from mining traditional mines to recycling electronics and high-tech products that contain them. Furthermore, companies are exploring the possibility of mining rare earths from deep-sea mud deposits.

Though higher prices due to reduced supply may dissuade some investors, those seeking opportunities in clean energy and other critical resources shouldn't let it dissuade them from exploring investment avenues in clean energy or other key resources. COVID-19's arrival has caused disruptions to global supply chains; but this presents new opportunities for those interested in investing in rare earth elements.

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3. They are a hedge against future supply disruptions

Rare Earth Elements (REMs) offer an effective hedge against supply disruptions. As key components in renewable energy and other technology industries, including military weapon systems, as more countries and businesses move away from fossil fuels, the demand for these metals increases rapidly; yet their availability can be affected by geopolitics; recent events like COVID-19 pandemic outbreak and rising tensions between US and China have caused greater alarm over their availability.

As such, there has been an effort to identify other sources for these essential minerals, prompting growth in the REE recycling industry - recovering these materials from old electronics and high-tech devices for reuse - as well as exploring novel methods of extracting them such as nuclear plants with thorium-based nuclear power generation or deep sea mining operations. Although these may not be as efficient as traditional mining operations, they offer effective solutions to volatile supply conditions.

Though REE markets are growing quickly, they still present investors with barriers to entry. One such barrier is pricing information being limited. While research firms provide this data at a reasonable cost and with subscription-based access, this can still pose as an impediment to investment.

MP Materials (NYSE:MPX), located in Mountain Pass, California and producing rare earth elements (REEs), has managed to overcome this barrier successfully. Sales increased more than 100% last year while profits skyrocketed 22-fold - this company provides an excellent example of how investing in rare earths can mitigate supply chain risks.

As demand for REEs increases, investors must understand the distinctive properties of this sector. REEs aren't simply 17 lanthanides with similar properties and uses; each REE is distinguished by distinct pricing dynamics and supply and demand dynamics; additionally their price can be affected by geopolitical or other intangibles that can make their price difficult to accurately forecast.

4. They are a good way to diversify your portfolio

Most people associate precious metals with gold, silver and platinum; however, other rare metals offer investors plenty of potential too. Rare earth elements (REE) play a pivotal role in producing high-tech devices like televisions and rechargeable batteries; they are used extensively in renewable energy products like wind turbines and electric cars; while also playing an essential role in national defense through jet engines and defense equipment.

REEs may not be as mainstream as gold and silver, but their impactful role is unmistakable in our everyday lives and they're poised for steady growth going forward - which makes investing in REEs an excellent way to diversify your portfolio and ensure its future stability.

REEs can be found almost everywhere, unlike gold and silver. From Earth's crust to byproducts from mining operations and even radioactive waste from nuclear power plants. They may even be recovered from old electronic devices and high-tech products; so ensuring enough REE supplies has become an ever more pressing concern.

Rare earths (REEs) cannot be easily bought on a public exchange; therefore, investing in mining companies that mine and process REEs is your best bet for investing. Look for mining firms with proven profits such as MP Materials Corp (NASDAQ: MPM) and Rare Element Resources (REEMF) in the US as well as Lynas Rare Earths (ASX: LYC) in Australia as good examples.

China currently dominates the global REE market. Over recent years, its dominance has only grown stronger, as production expanded and foreign companies were acquired. Concerns about China's dominance resurfaced following an escalated trade war between itself and the United States; as a result, some investors began investing in companies focused on developing new mining technologies and securing supply chains that may help mitigate supply disruptions in future.