Friday, September 7, 2012

Rare Earth Elements Provide Emerging Market Exposure

NASDAQ (New York City) - Over the past twenty years, there has been a dramatic rise in demand for consumer goods that require rare earth metals. They are used in many household products including computers, DVDs, cellular phones, rechargeable batteries. China is cited with producing over 95% of the world's rare earth minerals. When the Chinese government announced plans to reduce its exports of these minerals to 35,000 tons annually, the market reacted with a dramatic rare earths bubble. That bubble has since burst, which presents investors with a potentially lucrative opportunity for investment as the price for rare earth stocks, and mutual funds has dropped.

The company Market Vectors Rare Earth Strategic Metals (REMX) provides investors opportunities to invest in minerals as well as other emerging nations like Brazil, Chile and South Africa. The breakdown of REMX assets include the following:

United States 19.1%

Australia 18.2%

China 12.5%

Canada 11.0%

Japan 8.5%

Ireland 7.2%

France 7.1%

South Africa 5.7%

Chile 5.5%

Brazil 2.7%

Others 2.4%

REMX stock illustrates the drop in share price mentioned above due to the rare earths bubble.

Comment: The prices of rare earths are dictated by the market which can  be easily manipulated by nations that have monopolies on mineral sources. In this case, a single nation (China) was able to send mining companies into a tailspin with a single policy. Other countries, particularly those with a history of anti-western sentiment, will likely be able to exercise the same power if they control large mines producing minerals.

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