Why Invest in Rare Earth Metals?
A significant supply squeeze is materialising with these industrially critical minerals.
Until now, rare earth metals have not been widely accessible to investors. Rare Earth Bullion Ltd offers investors and collectors the exclusive opportunity to own these vital metals, in a familiar and certified form, to capitalise on potentially explosive price gains that are likely to follow.
In addition, with the current uncertainty surrounding the global economic cycle and higher inflation around the corner, precious metals and other similar physical commodities are primed to be the beneficiaries of such an environment.
Supply: China is the worlds monopoly producer and is consistently decreasing its exports.
Demand: The industries these metals are used in are booming.
Substitution: Due to the unique properties of rare earths, substitution of these metals would mean that whole systems would need to be re-engineered, made larger and less efficient.
A Market: Until now, there has not been a secondary market for rare earth metals. Rare Earth Bullion Ltd will help match buyers and sellers of our bullion bars so they have an avenue to liquidate should they need to do so.
Inflation Hedge: Like gold and silver, the metals are set to appreciate in the face of inflation.
Contra-Dollar Hedge: The metals are priced in US Dollars and therefore increase in price as the dollar weakens.
Diversification Benefits: In the recent commodity market correction starting in May 2011, Silver fell roughly 28% from it's highs at $50 per troy ounce. In this time rare earth metals continued their upward trajectory. Their prices are pure and only susceptible to traditional supply and demand forces with no influence from price speculation. This feature brings a unique diversification benefit to precious metal investors, whose traditional precious metal exposures could have been protected by their exposure to rare earth metals.
Please discover Our Philosophy on rare earth metal bullion. We have also posted some news articles where the compelling reasons to invest in rare earths is discussed in more detail.
A New Asset Class:
As the asset class becomes more mainstream, there will likely be more and more ways to invest. Currently there are few avenues for investors who are limited to buying the stock of companies that mine these minerals, either individually or through exchange traded funds. For investors not wishing to take on company specific risk and who are looking to benefit solely from movements in the underlying commodity itself, there are currently no credible solutions. Specimens can be bought but generally in small amounts for exorbitant sums of money. Even then, these specimens do not come as certified products so investors could be buying anything. This major issue gives rise to the biggest problem of all. Without any guarantee of purity and quality, the resale of these metals is very difficult. The secondary market for these metals is non-existent...literally, other than the producer to consumer market, there is no alternative market that exists for physical rare earth metals. Rare Earth Bullion is currently in discussions with various counterparties to offer our clients a guaranteed buy back service. In the meantime, we will accept sell orders from clients wishing to liquidate their holdings and match up with buyers who come directly to us. We will also endeavour to buy back the metals on our own books but the current illiquidity in the rare earth metal market means we cannot guarantee this service for the timee being.
There are some key themes to suggest that prices will appreciate significantly over the coming months and years:
Today, 95% of all rare earth elements are produced by mines in China. They has begun to restrict export quotas and increase export taxes, causing increases in prices and concerns from manufacturers about the availability of materials in industries which are expanding rapidly.
It is estimated that China will produce roughly 110,000 tonnes of rare earths in 2011 of which around 30,000 tonnes will be allowed for export. As a measure to reduce environmental damage and stop illegal production of the metals, China wants to retain greater control. As well as being a larger consumer of rare earths going forward, it is likely to further restrict exports in the years to come, having greater control over rare earth metal prices.
As industries like mobile phone production and electric car making boom, predictions are that Western demand for rare earths will increase by 12% over the coming few years and that Chinas own demand will even exceed this. In the face of this, other suppliers will increase their production but with all of the few plausible sources of heavy rare earth metals many years away from production, China will likely be the sole supplier for at least another 6-8 years.
All of the new non-Chinese planned production will be predominantly light rare earths leaving China as still
the virtual sole supplier of heavy rare earth metals.
Inflation and Contra-Dollar Hedge
Since the financial crisis of 2007/08, governments have been desperately attempting to avoid deflation and promote as much inflation as possible. The simple reason for this? To help reduce the debts that are now booming in many countries. The sovereign debt crisis in Europe is testament to this fact and the US will be the next to fall. Through astronomic financial injections by governments ‘creating’ money from thin air in order to stimulate their economies, a widespread currency depreciation is taking place. Most important is the US Dollar. Many commodities including rare earths, are priced in USD’s. Therefore it is simple to see why Ben Bernankes ‘Quantitative Easing’ policies are aimed at devaluating the dollar, to devalue the spiraling debt burden created by ‘Quantitative Easing’. With more Dollars in the system, prices go up as more money is chasing the the same amount of goods. In the case of rare earth metals, more dollars are chasing LESS goods as China tightens its grip on global rare earth supply.
When these factors combine as they are doing right now, there appears to be only one direction for rare earth metals going forward.
Please discover Our Philosophy on rare earth metal bullion.