A rare earth rush is underway, and it's not just a gold rush-style frenzy. The stakes are much higher, with global security and technological dominance at play.
In the US, rare earth stocks are soaring, as Beijing's tighter control over these critical materials sparks a search for alternatives. These rare earths are essential for everything from your smartphone to advanced weaponry, and China's dominance in the market has investors worried.
But here's where it gets controversial: while US rare earth companies are booming, European markets are more cautious. The STOXX 600 and CAC 40 indices saw modest gains, but Frankfurt's DAX and London's FTSE 100 slipped.
Russ Mould, investment director at AJ Bell, summed it up: "The FTSE 100 was stuck in the mud as the rest of Europe ploughed ahead." He noted the strength in consumer and utility stocks, but also the weakness in miners and healthcare, and the notable sell-down of defence stocks, including Babcock.
Across the markets, there's a mixed bag of news. Oil prices were down on Friday morning, while gold prices continued their upward trajectory, hitting $4,018.00 in Europe. US futures were slightly up, and the euro gained against the dollar.
The real story, though, is the rise of rare earths companies overseas. As mining stocks led losses in Europe, the STOXX Europe Basic Resources index dropped. This contrasts with the US rally, where rare earth stocks surged after China's announcement.
China's dominance in rare earths is undeniable. It accounts for a massive 70% of the global supply, and these materials are crucial for defense and technology. US investors are now looking to American alternatives, hoping Washington will invest in domestic supply chains.
Companies like USA Rare Earth Inc. and MP Materials Corp are seeing their share prices skyrocket. USA Rare Earth Inc., building a domestic rare earth magnet supply chain, gained nearly 15% on Thursday, and has risen an impressive 151% since January. MP Materials Corp, an American rare-earth materials company, gained over 2.4% on Thursday and a whopping 341% since January.
And this is the part most people miss: it's not just about the US. Australian rare-earth mining companies like Lynas Rare Earths and Iluka Resources saw losses in Asian trade, and Chinese Shenghe Resources, a state-owned rare earths company, also took a hit.
Beijing's measures mean companies must apply for licences to export products containing certain rare earth metals sourced from China. This move has sent shockwaves through the market, and the search for alternatives is on.
So, what's your take on this rare earth rush? Do you think the US will succeed in building a robust domestic supply chain? And what about the impact on global markets? Let's discuss in the comments!
