REMX Comes at Right Time as Rare Earths Shine

REMX Comes at Right Time as Rare Earths Shine

The VanEck Vectors Rare Earths/Strategic Metals ETF (REMX) is a lone wolf among rare earths exchange-traded funds, and this year the company has had significant success in asset gathering, with the work it has been doing paying off, with a 56.59% gain year-to-date.

Rare earth minerals, also known as "chemical vitamins", are a group of 17 elements used in the manufacture of various devices and used in small doses to produce powerful beneficial effects. These minerals are widely used in smartphones, batteries, turbines, lasers, electromagnetic guns, missiles, advanced weapons sensors, stealth technology, and jamming technology.

For example, lanthanum is used in lighting devices and camera lenses; neodymium in hybrid cars; praseodymium in aircraft engines; europium in nuclear reactors and gadolinium in MRI and X-rays. Refineries also use rare earth catalysts to process crude oil into gasoline and jet fuel. Rare earth elements (REEs) are true of strategic importance. These materials are often mentioned in conjunction with strategic metals. Although some experts separate the two, the investment implications and opportunities for both are very similar.

REEs, which are not rare by name, are part of the ongoing geopolitical tensions between the US and China due to China's dominance of the global market for REEs. Many US experts believe that China's dominance will be strengthened after the US leaves REE-rich Afghanistan. Conversely, while the US has a large demand for rare earth metals, as some US experts say, environmental regulations are preventing the country from increasing its rare earth production.

"REEs and strategic metals have been increasingly used in high tech applications linked to defense or the transition to a low carbon world, among others. These uses have pushed demand for many of these metals higher in recent years and current trends indicate that demand may only increase," said Brandon Rakszawski, senior product manager for ETFs at VanEck.

As mentioned above, REEs are an important component of a variety of electronics, such as smartphones and a range of military technologies. In addition, rare earths are needed for electric vehicles, solar panels, and wind turbines, making these minerals vital in the renewable energy sector

However, unlike copper, gold, and silver, there are no exchange-traded products dedicated to individual rare earth elements, meaning that the company is arguably the best way to enter this space, particularly for those investors unfamiliar with the futures markets.

"Another way to access this space is through an equity investment in the companies that are involved in the extraction and processing of these metals. Their share price is influenced by the supply and demand dynamics that also influence metals prices. Company provides global exposure to companies involved in producing, refining and recycling rare earth and strategic metals," adds Rakszawski.

The strength of REMX lies in the leverage it provides across a diverse range of asset classes. There are 17 REEs and 26 strategic metals, and the company touched many corners of these areas.

"Many of our portfolio companies have broad exposure to more than one rare earth and/or strategic metal, but several metals have had prominent exposure in recent years. REEs, lithium, cobalt, titanium, tungsten, and molybdenum have all been common exposures within REMX’s broader rare earth and strategic metals portfolio," Rakszawski concluded.

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