Rare earth element stocks have been in the spotlight recently after China threatened to cut of U.S. supply as the trade war ramps up.
On Tuesday, CCTV reported a “relevant official” from China’s National Development and Reform Commission said China’s next countermeasure to U.S. tariffs may involve it blocking access to rare earth metals used in technology like smartphones and computers. In 2018, China produced about 78 percent of the world’s rare earth elements. China also owns about 40 percent of all rare earth element resources.
“What can I tell you is that if anyone were to use products that are made with the rare earths that we export to curb the development of China, then the people of [south Jiangxi province where rare earths are mined] as well as all the rest of the Chinese people would be unhappy,” the official said.
Hu Xijin, editor of China’s Global Times, also mentioned rare earth elements in a Tuesday tweet.
“Based on what I know, China is seriously considering restricting rare earth exports to the U.S. China may also take other countermeasures in the future,” Xijin wrote.
Despite the threats, some analysts are saying it may actually be difficult for China to easily cut of its rare earth element trade with the U.S. Almost all of the rare earth elements China exports to the U.S. are embedded within technology, rather than raw elements. The amount is also relatively small, at around 4,000 tons worth about $175 million.
Still, the last time China decided to limit rare earth element exports, the price of the rare earth miners index (MVREMXTR Index) was roughly nine times what it is today.
How To Play It
U.S. rare earth element stocks have been volatile in trading this week. Traders who believe speculation over trade war restrictions will ultimately drive rare earth element prices and share prices higher should keep an eye on these five stocks:
- Freeport-McMoRan Inc (NYSE: FCX)
- BHP Group Ltd (NYSE: BHP)
- Tronox Holdings PLC (NYSE: TROX)
- General Moly, Inc. (NYSE: GMO)
- Denison Mines Corp (NYSE: DNN)
- For a more diversified play, watch the VanEck Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX).
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