Fun With Rare Earths

Core Insights - Rare Earths are increasingly important due to their applications in various high-tech products, with China dominating the mining and processing sectors [1][4] - The market for the top 20 Rare Earth Elements (REEs) is estimated at $15 billion, indicating a small market size compared to major corporations [4] - The stock prices of companies involved in Rare Earths have seen significant increases, with MP Materials up 234% and Lynas Rare Earths up 106% year-to-date [2] Industry Overview - Rare Earths are essential for producing advanced components and products, particularly permanent magnets, which are critical for both civilian and military applications [3][5] - The U.S. government has identified five REEs as critical, with Neodymium being the most significant due to its role in permanent magnets [5][6] - The complexity and capital intensity of processing REEs contribute to China's overwhelming market share, as the incentive to invest in this sector is low in a non-subsidized market [4] Market Dynamics - The imbalance between small supply and large demand for Rare Earths has led to increased prices, benefiting certain stocks and ETFs in the sector [2] - The military applications of Rare Earths are minor compared to civilian uses, suggesting that non-China production could meet military needs without significant impact on the overall market [3]