Select-Global – Investing in Rare Earth Commodities

Many of the high-tech devices we depend on—cell phones, laptops, and hundreds of others—would not exist without an obscure group of elements known as rare earths.

Rare earths were discovered beginning in the late 18th century as oxidized minerals—hence "earths." They're actually metals, and they aren't really rare; they're just scattered. A handful of dirt from your backyard would probably contain a smidgen, maybe a few parts per million. The rarest rare earth is nearly 200 times more abundant than gold. But deposits large and concentrated enough to be worth mining are indeed rare.

China, which supplies 97 percent of the world's rare earth needs, rattled global markets in the fall of 2010 when it cut off shipments to Japan for a month during a diplomatic dispute. Over the next decade China is expected to steadily reduce rare earth exports in order to protect the supplies of its own rapidly growing industries, which already consume about 60 percent of the rare earths produced in the country. Fears of future shortages have sent prices soaring.

World demand will probably exceed supply before the end of 2011, says Mark A. Smith, president and CEO of Molycorp, an American company that reopened a rare earth mine in California, last year.

"We're in a supply crunch right now, and it's a pretty severe one," says Smith. The demand shows no signs of abating. In 2015 the world's industries are forecast to consume an estimated 185,000 tons of rare earths, 50 percent more than the total for 2010.

Conservatively, the global market for Rare Earths has grown at an annual rate of approximately 8%-11% over the last decade. - source "the World Trade Organisation". But with the continued increase in demand due to the new wave of consumer electronics, the price has dramatically increased and rare Earths have now caught the attention of the investor.

The development of rare earth mines in the U.S., Australia, Russia, and other countries should help to meet some of the demand, but it’s evident that there are opportunities for investors to make good profits in this sector. Now that governments around the world have identified that there is a problem with supply and potential monopolies, all countries are trying to implement trading strategies, but it could be some time before we see new supplies in the market place. The end result for at least the next 5 years for this commodity is that investors will be queuing to become involved in what can only be compared to a Gold Rush.

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