Step aside precious metals: rare earth metals are on the move to start 2021. While gold and silver received much attention in 2020 amid a flight to safety due to the pandemic, a play on rare earth metals could be a key diversifying play for investors looking to add alternative assets via the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX).
“Amid the COVID-19 crisis, the global market for Rare Earth Metals estimated at US$4 Billion in the year 2020, is projected to reach a revised size of US$6.6 Billion by 2027, growing at a CAGR of 7.3% over the analysis period 2020-2027,” a recent press release noted. “Catalysts, one of the segments analyzed in the report, is projected to record a 8% CAGR and reach US$1.5 Billion by the end of the analysis period. After an early analysis of the business implications of the pandemic and its induced economic crisis, growth in the Permanent Magnets segment is readjusted to a revised 7.9% CAGR for the next 7-year period.”
REMX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® Global Rare Earth/Strategic Metals Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index.
The index includes companies primarily engaged in a variety of activities that are related to the producing, refining, and recycling of rare earth and strategic metals and minerals. A number of its top holdings are in China, which also gives investors international exposure.
Looking at its 3-month chart below, REMX is already up over 90%:
U.S., China Poised for Growth
Given their sheer size, it’s no surprise to see the two largest economies poised for growth in the rare earth metals industry. Thanks to their large economies of scale, the U.S. and China will experience exponential growth that could help propel REMX to further gains.
“The Rare Earth Metals market in the U.S. is estimated at US$1.1 Billion in the year 2020. China, the world`s second largest economy, is forecast to reach a projected market size of US$1.5 Billion by the year 2027 trailing a CAGR of 11.1% over the analysis period 2020 to 2027,” the press release added. “Among the other noteworthy geographic markets are Japan and Canada, each forecast to grow at 3.9% and 6.5% respectively over the 2020-2027 period. Within Europe, Germany is forecast to grow at approximately 4.7% CAGR.”
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