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, lost ground last week, but the fund may be poised to get a lift from Uncle Sam.
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 (MVREMXTR), which is intended to track the overall performance of companies involved in producing, refining, and recycling of rare earth and strategic metals and minerals. REMX offers investors the opportunity to participate in the rare earth metals arena, without as much of the risk presented when investing in an individual rare earth stock.
To reduce dependence on Chinese imports of rare earths, the Defense Department is considering stockpiling the minerals for certain weapons of war.
“The US military plans to stockpile rare earth magnets used in Javelin missiles and F-35 fighter jets, according to a government document seen by Reuters, a step that critics say does little to help create a domestic industry to build specialized magnets now made almost exclusively in Asia.”
Important Decision
Rare earth metals are crucial factors in the 21st century, as they are a part of industries as disparate as electronics, mobility, and sustainable energy. Strategic Metals include rare earth elements as well as specialty metals used in nuclear reactors, LEDs, magnets, electric motors, sensors and many other components used in smartphones, flatscreens, hybrid vehicles, and our homes. Now they are becoming available for physical investment, including secure storage in bonded warehouses.
“The Pentagon is seeking proposals to cache a rotating six-month supply of neodymium iron boron (NdFeB) magnets, a type of rare earth magnet essential to weapons manufacturing, according to the document, detailing the latest attempt to weaken China’s control over the rare earths sector,” reports Reuters.
China is the world’s dominant supplier of rare earths, controlling more than 85% of the market, allowing it set quotas throughout the year that affect prices and supply.
“Reuters reported last week that the Pentagon is funding construction of rare earths processing facilities,” reports the news agency. “But after rare earths are processed, they must be turned into magnets, otherwise they are of little value to electronics and weapons manufacturers.”
For more investing strategies, visit our Tactical Allocation Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
