Investing In Rare Earth Metals
The manufacture of many hi-tech products nowadays involves the use of rare earth metals
. Their highly magnetic characteristics and their extremely light weights make them a vital component in many applications, allowing things like cell phone and car batteries to be produced as efficiently as possible; rare earth metals also used in hi-tech military equipment, satellites and lasers. With the steady advance of technology, the demand for these rare earth elements will keep rising as more supplies of rare earth metals will be required by manufacturers.
It has been well documented that China dominates the rare earth market and has imposed export restrictions on the materials needed by worldwide manufacturers. Because of this other countries have begun their own mining and production of rare earths. As a result, a large number of relatively small new mining companies have sprung up, which investors can buy shares in. The search for cheaper alternatives is under way in various technology sectors, and techniques are even being looked at for rare earth metal recycling particularly in Japan.
Despite these efforts, as demand keeps growing, rare earth metals will continue to offer a lucrative investment opportunity and should therefore be considered as part of any investors portfolio.
How to Invest in Rare Earth Metals
There are a lot of variables that come into play with all rare earth stocks. Emerging rare earth element stocks may seem like one of the most intriguing investment plays, but there is no guarantee that these start-up companies will even be profitable. Many investors feel this is perhaps not the best way to gain exposure to the market, citing the overheads and expenses of the company, cash flow, environmental issues, plus so much more that affects mining rare earth metals as reasons to be cautious. There are many investors who feel this option is too risky and do not want to get caught with yet another stock going in the wrong direction, especially with the current volatility of global stock markets.
An alternative way to buy into the rare earth metals boom therefore is to purchase them in their physical form. Trading shares in mining and production companies may appear easier at first, but buying the actual physical elements removes all the variables associated with uncertain stock markets, not to mention the in depth research that an investor would have to carry out into the companies involved.
Buying a basket of rare earth metals in their physical form is an excellent way to gain exposure to this market, and can offer the investor certain benefits.
Hedge against Inflation with Capital Growth & Liquidity
High on most investors list of priorities is protection of liquid assets from currency devaluation and inflation, especially in the current economic climate. As fiat currencies continually decline in value, most hard commodities effectively increase their value during times of inflation. Rare earth metals in their physical are no exception to this rule.
The scarcity of rare earth metals is expected to increase their value over the next three to five years, with an increasing and constant demand for rare earth metals combined with a diminishing and limited supply offering attractive potential for profits. Smart investors will recognise that now is the time to add rare earth metals to their portfolios in order to realize the maximum returns on their investment.
Rare earth metals can be sold at anytime, so buying physical assets such as rare earth metals also provides investors with liquidity. The demand for these elements is not going to decrease any time soon. Increasingly high prices and tightening supply chain are a major problem as rare earth metals are crucial for manufacturing a vast array of products such as disk drives, hybrid cars and mobile phones.
Reports from rare earth specialists suggest that Chinas domestic demand will catch up with supply around 2015 leaving the rest of the world with a huge shortfall of rare earth metals. There are strong indicators that rare earth metals are one of the best asset classes currently available for investors.
by: Paul Lebeau
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