Rare Earths: Volatility, Geopolitics And The Global Race To Secure Supply

Image Source: PixabayREE’s and other critical metals are highly price volatile markets that exhibit their own market dynamics. Event driven, policy driven & news driven moves are a frequent occurrence in the critical metals markets. Historical analysis clearly shows severe price movements when supply is constrained.It’s predicted that REE growth will double by 2030, as the need for these specialized critical metals inside the global industrial power dynamic is growing exponentially, paired with a strategic drive to move away from Chinese REE reliance which continues for nations like Japan, EU, USA and Australia. (China controls 60-80% of the Global REE market and supply chain. It also currently holds the worlds largest proven reserves, & it continues to lead the world in REE production & processing). Capturing the complete REE supply chainProduction poses complex challenges with prolonged timelines. For the Lynas corp in Australia even with Gov subsidies timelines to commercial magnet production could be as much as 3-5 years. In Sweden the largest REE discoveries in the EU were recently found, holding all 17 REE chemical components that make up the rare earth elements. Timeline’s here could be as high as 10-15 years. MP in Texas is ramping up it’s domestic production hoping to have completed magnets by 2028. MP saw extreme price action last year on much news about US Government funding as the US rushes to mitigate it’s rare earth dependence on China. Most of the PA was news driven & not driven by proven profits. The markets are always forward thinking, however, the price shortly after corrected quickly closer to real time valuations.EV’s alone require 2-3Kg of rare earth magnets. Smart phones, Military/Defense tech (Posing crucial importance of national security ) & Aerospace systems demand is surging. Along with a new boom in Green energy outside of the US. Wind energy is increasingly reliant on magnet generation tech. Especially for offshore wind farms. Each offshore wind turbine operating at 12-15 megawatt needs 600-900Kgs of rare earth magnet materials.These emerging markets make great LT investments by betting on growing demand alone, offset by ST trades during event driven circumstances. Be it mining bans, DOD contract news or environmentally driven impact news along with close attention to Geopolitical dynamics that are ever shifting. The L/S portfolio play allows us to efficiently hedge our risks during frequent periods of volatility. As well as exponentially increasing upside exposure during macro price surges by locking in extreme gains whilst leaving the LT investments to run the course.These markets are environmentally damaging, as the industry itself is oddly heavily needed for the build-out of clean energy solution. And many companies are seeking to implement cleaner practices and technologies moving forward. Recycling is a hopeful in the game, estimates to reduce mining requirements by 2030 using recycling as a supply of REE’s are at 20-30%.REE’s offer incredible investment potential over the coming decade for those willing to undertake the volatility as the rest of the world plays catch up to China’s grip on REE production. But it will only be for the brave & the astute.More By This Author:Equities Seek Rebalance After Late Liquidation As Labor Data Shapes Rate Outlook U.S. Equities Trade Rotationally As Dovish Signals Clash With Firm Dollar And Oil Equities Hold Rotational Bias As Geopolitics, Oil And Rates Shape Early-Year Trade