By Nomi Prins, Editor, Inside Wall Street with Nomi Prins
China could soon choke off the supply of rare earth elements (REEs)…
I wrote about that in my essay yesterday.
China is by far the biggest producer and processor of rare earths. It’s responsible for almost 70% of global rare earths output.
The problem is that America is dependent on REEs for sophisticated technology like smartphones and high-tech military equipment.
And right now, tensions between the world’s two biggest economies are at their worst in decades.
So this puts America at a disadvantage.
But the U.S. government is acting fast.
It’s moving to secure supplies of REEs that don’t involve China.
So today, I’ll tell you all about what the U.S. is doing to boost the REE industry at home… and how you can profit from America getting its hands on the supply of metals we can’t live without.
But first, if you haven’t reserved your spot for my Power Shift 2023 strategy session… be sure to RSVP with one click right here.
Tomorrow, on May 10 at 8 p.m. ET, I’ll reveal how a new law is poised to unleash $4 trillion into a new energy subsector called “SMR.”
SMR could be the solution to America’s – and the world’s – energy problems. And only one firm has the federal license to produce this technology in America.
So during my special briefing, I’ll tell you all about how you can play this company for less than $2 a share.
Just go here to reserve your spot instantly.
Now, back to America’s efforts to produce REEs at home…
America’s Push to End China’s Stranglehold
Last year, lawmakers introduced legislation to force defense contractors to stop buying REEs from China by 2026.
As I told you in my previous essay, the U.S. military depends on REEs for some of its most advanced military equipment. They are used in guidance systems, drones, anti-missile systems, radars, and fighter jets.
Now, the government is using the Pentagon’s purchases of billions of dollars’ worth of military equipment as leverage.
It’s making defense contractors support the revival of U.S. rare earths production.
For instance, the 2023 National Defense Authorization Act (NDAA) already requires contractors to reveal where their REEs were mined.
The Act also allows the Department of Defense (DoD) to mandate a tracking system of the contractor’s supply chain.
In other words, the NDAA incentivizes domestic rare earths production.
The government has also been putting money towards that goal.
Here are just a few examples…
In June 2022, the Pentagon signed a $120 million contract with Lynas Rare Earths. The company will build a U.S.-based, rare earths separation plant in Texas.
The full-scale commercial plant will be the first one outside of China to process heavy rare earths. These are typically used to make large magnets for wind turbines and hybrid cars.
Lynas is based in Australia, which is a military ally and a much friendlier trading partner than China.
The deal came on the heels of the DoD giving MP Materials $35 million to build its processing facility for rare earth metals.
MP Materials owns and operates the Mountain Pass mine. It’s located on the border between California and Nevada. In fact, the company is the only volume producer of rare earth minerals in the Western Hemisphere.
Mountain Pass is one of the highest-quality rare earth deposits in the world. So far, however, output from Mountain Pass has been sent to China for processing.
This new facility, though, will allow MP to bypass China in its supply chain.
Again, these are just a few examples…
The bottom line is that these measures are already showing signs of success.
The U.S. Geological Survey estimates that the U.S. produced 43,000 metric tons of rare earths last year. This was more than triple the 14,000 metric tons produced in 2018.
So the trend for domestic rare earths is already taking off…
Domestic Rare Earth Production Is Not a Partisan Issue
One thing is helping the trend for domestic rare earths. And it’s that America’s push for REEs is not a partisan issue.
Democrats like REEs. So do Republicans.
The former support rare earths because they play a role in sustainable energy, or what I call “New Energy.”
The latter support REEs because they want to boost domestic rare earths production and strengthen the U.S. military’s might.
Plus, there are two major governmental players making large investments in domestic rare earths: the Pentagon and the Defense Department.
The upshot is that government officials on both sides of the aisle don’t want to rely on China for REEs anymore.
That’s a huge problem for China.
With the U.S. push for domestic supply, some analysts predict China will lose as much as one-third of its market share by the mid-2020s.
But China won’t sit around waiting for this to happen.
As I explained yesterday, the Chinese were already considering a ban on REE exports.
Now, with the U.S. building out its own REE mining and processing capacity, it’s more likely the Chinese will implement these bans sooner.
The good news is, you can still position yourself ahead of this trend…
How to Play This Once-In-A-Decade Opportunity
If you’ve been following my work, you know I spend a lot of time in Washington.
As an investigative financial journalist and former Wall Street insider, I learnt that it pays to look closely at what the government is doing.
That’s because where government money goes… the markets follow.
REEs fit the bill.
And there are several ways to profit from this trend while it’s still taking off.
To invest alongside the U.S. government, or with companies located outside China, check out the REE companies I mentioned earlier: Lynas Rare Earths (LYC.AX) and MP Materials (MP).
Just know that investing in individual REE mining companies comes with many risks. These range from technological and environmental to political.
That’s because mining and processing REEs is challenging, messy, and expensive.
On an individual company level, this means that problems may arise. It also means you’ll have to stomach some volatility.
So if you’re just looking for broad exposure to the trend, consider the VanEck Rare Earth/Strategic Metals ETF (REMX). With this exchange-traded fund, you can position yourself to benefit from the overall growing need for rare earths worldwide.
It also carries less company-specific risk than investing in individual companies.
Now, as I explained yesterday, REMX holds quite a few China-based companies. But it offers as much broad exposure to the REE industry as possible, including investment stakes in Lynas and MP Materials.
Regards,
 |
Nomi Prins
Editor, Inside Wall Street with Nomi Prins
P.S. As part of the push for America’s resource independence, both sides of Congress are beginning to embrace a new form of fuel called “SMR.”
And a new energy law – Bill S.1111 – could unleash a $4 trillion torrent of government cash into the SMR sector.
That’s why I’m holding an urgent energy briefing tomorrow, May 10 at 8 p.m. ET to share all the details about Bill S.1111, SMR, and how this trend can hand you as much as 20x your money in the long run. (Reserve your spot with one click here.)
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