Would it be wise to invest in rare earth minerals now? Rare earth minerals are used in high-tech manufacturing of such products as batteries, glass, green technology and electronics. Recently the prices for the rare earths had increased due to China's increasing restrictions on exports to other countries such as Japan and the United States. And that also includes the fact that China has a huge monopoly on rare earths accounting over 90% of the world's supply! I know that Molycorp is restarting the California mine and other countries are finding alternative sources, but how much can be attained compared to China's? Can a shortage occur in the near future that would devastate world economies? Would recycling the end products such as computers and other electronics be more cost-efficient and a more viable solution? I would like to hear some of your thoughts about this growing problem.
It is an interesting area of speculation. I bought a bunch of rare earth magnets, just because they're fun and the kids like them. I wouldn't consider them an investment though. They're commercially available, though a bit expensive. When I was reading about them I found out that for the most part rare earth elements aren't really "rare" like precious metals. The problem is that you don't find them in concentrated form, like we do with gold for example where there are specific areas you can mine and get it in quantity. So the process of mining rare earths is quite different, requiring huge areas to be excavated and by the sheer volume of the materials gone through, trace amounts of the rare earths become commercially viable amounts. So, the reason China has become a significant producer is that their government doesn't seem to care about the destruction done to the environment. In the USA, Canada, or other large western nations, we can get away with taking a single mountain for its coal, or some small areas for gold mines, etc. So, an area where there is a heavy concentration of rare earths, like Bayan Obo in China for example, if you google for images of it, you'll see stuff reminiscent of lunar landscapes. There are areas in the USA and other countries where the rare earths are probably as heavily concentrated as in China, in the Clark Mountains for example. But, the combination of environmental concerns, regulations, cost of labor, etc, make it economically unviable for mining ventures. The problem I have with looking at it as an investment is that I believe eventually there will be new processes innovated that take much of the pain and expense out of mining, so holding rare earths for the long term I don't think is that great. Playing the futures market, on the other hand, could be extremely lucrative (or could bankrupt you on the other hand), if you can play on the instability of the economy, China's political situations, and so on.
I don't think it is too wise to invest in rare earth. Only rare or precious will not make the product to be sold at higher price, the market trend is also required. If you sell gold you will get easy customers, but for rare earth you may not get easy customers.
Right now, the production of rare earth metals are completely controlled by China. Russia and Australia are having large deposits of these metals, but they have not developed the mining. It will take years or even decades to develop these deposits outside China. Till then, China will decide everything.
Japanese researchers have found an estimated 80 to 100 billion tons of rare earth deposits in the Pacific Ocean. Unfortunately the problem, that Vest007 pointed out is it would take many years to make the mining commercialized and economical viable. For this underwater deposit, it can take up to 20 years to develop and there will be many challenges when trying to mine it from the ocean.
There is another problem. It might take 20 years to mine these deposits, but the prices will keep falling on the expectation of a future glut. Rare earths are extremely risky for me. I'd rather stick with Gold and Silver rather than burning my fingers in something in which I don't have sufficient information and knowledge.
