In the materials space, a rare earth and strategic metals-related exchange traded fund has surged as improving technologies raise demand for rare earth metals.
The VanEck Vectors Rare Earth/Strategic Metals ETF (NYSEArca: REMX), which is comprised of global companies involved in producing refining and recycling rare earth and strategic metals and minerals, was up 2.7% Wednesday and rallied 39.4% year-to-date.
The sub-sector strengthened Wednesday after China started stockpiling rare earth metals for strategic reserves, raising concerns over Beijing’s control over the coveted resources, AFP reports.
China produces over 90% of the world’s rare earths, which are used in hi-tech equipment like iPods to missiles. The country has also set production caps and export quotas on the metals, which has contributed to the rising prices. The EU, U.S. and Japan have even petitioned the World Trade Organization, claiming China is unfairly choking off exports to benefit domestic industries.
According to the China Securities Journal, Beijing has started strategic buying of rare earths due to the low prices.
“Prices of rare earths are now at low levels, so China definitely wants to build strategic reserves at this time,” a Shanghai-based metals analyst, who declined to be named, told AFP. “The other reason is that China hopes to control rare earth prices within a reasonable range, so as to encourage the long-term, healthy development of downstream industries.”
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Rare earth prices are also rising as a number of environmental and regulatory checks hit the Chinese metals sector, Reuters reports. Consequently, rare earth prices in China is showing signs of bottoming out form the depressed price environment of 2012 through 2016.
However, with prices rising, China also has the ability to keep the increase in check as it is sitting on an unknown amount of stockpiled rare earth metals, which may be released into the markets. The country is a leader of green technology, such as solar panels, and it is in its own interest to keep rare earth prices lower.
For more information on the miners space, visit our metals & mining category.