Trade wars and technology put rare-earth metals in the spotlight, as Chinese President Xi Jinping visited a Chinese rare earth mining and processing facility in the Ganzhou, Jiangxi province last night, possibly to highlight the fact that China is the largest producer of rare earth metals in the world.
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, flat screens, hybrid vehicle, and our homes. Now they are becoming available for physical investment, including secure storage in bonded warehouses.
Bob Pisani commented on CNBC, “You can see here this is where the line of attack is going to come from. It’s not a coincidence that President Xi visits a rare earth facility. He’s holding your hand and telling you, ‘Oh by the way, all those cell phones you guys have, molybdenum, lithium, chromium, niobium, all these weird rare earth metals, they’re all made here. Oh and by the way, maybe there will be a shortage of molybdenum showing up in the next… what a coincidence. Isn’t that unusual. All that pork we ordered, that’s gone. Oh wait that happened last week. And maybe, oh look, Caterpillar didn’t get a new deal with a big company in China. Maybe Koboda got a deal. This is how it’s gonna work.”
“China is far and away the largest producer. It’s somewhere in the order of 80-90% of all rare earth metals are produced in China in the world. It used to be a few, and they basically all went away. This was a big story about 7, 8, 9 years ago. Remember we used to do these rare earth metal stocks. Most of them have gone away. The Chinese have consolidated and basically have cornered the market in rare earth metals. So I think this is a significant story,” added Pisani.
The VanEck Vectors Rare Earth/Strategic Metals ETF (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.
Looking at individual holdings in REMX, China Molybdenum Co Ltd (603993 CH) accounts for about 7.41% of total assets, followed by Eramet (ERA FP) and Zhejiang Huayou Cobalt Co Ltd (603799 CH).
With a handful of Chinese names in the fund holdings as well, the REMX may provide an opportunity to participate in market movement based on the current trade war environment.
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