Rare earth metals, along with the related exchange traded fund, have been in the news in recent years due to supply concerns. However, the sub-sector has been a weak performer, and now Toyota (NYSE: TM) is developing technologies that could side-step the demand for rare earths all together, in which case China’s influence on prices will diminish.
Market Vectors Rare Earth/ Strategic Metals (NYSEArca: REMX) has lost 20.2% over the past year.
According to Reuters, Toyota could develop and bring to market hybrid and electric vehicles that don’t require expensive rare earth metals in two years if prices on the metals stay elevated.
A Toyota spokeswoman stated that the company is researching ways to reduce the company’s need for rare earths, Japanese Kyodo News reported.
Rare earth metals are currently used in the magnetic motors that power hybrid and electric vehicles. As the automobile industry moves toward more eco-friendly products, demand for these vehicles is expected to rise.
China, which accounts for 95% of the world’s rare earth metals supply, imposed export quotas back in 2010, drastically limiting the world’s supply. Japan makes up one third of global rare earths demand, but the country has moved toward reducing its consumption through subsidies for recycling and investing in new technologies. [China Buoys Rare Earth Exports — Can ETF Reverse Course?]
Market Vectors Rare Earth/ Strategic Metals
For more information on the rare earths industry, visit our rare earth metals category.
Max Chen contributed to this article.