Rare earth metals have become somewhat of a hot topic a few months ago. A group of 17 crucial metals needed for manufacturing and defense, America’s domestic rare earth industry is almost non-existent, with the nation instead buying almost all of its rare earth metals from China. Following threats by Beijing to raise tariffs on these metals, the U.S. has embarked on a policy shift to encourage domestic production once again.
Both President Donald Trump and Australian Prime Minister Scott Morrison are planned to unveil a plan this Friday to secure a consistent supply of rare earth minerals. Australia is one of the largest producers of these metals, albeit to a much smaller extent than China.
A number of Australian-based rare earth miners, such as Lynas Corp (OTC: LYSCF)(ASX: LYC), are planning to start operations in the U.S., something that policymakers are encouraging.
The plan in question between the two countries will be revealed during a state visit by the Australian prime minister to the White House. “Both countries share an interest in making sure the global supply of rare earths is stable and secure,” said an official on Thursday ahead of the meeting. He added that the goal of this plan was to combine resources and expertise “to make sure there’s a stable and secure global market that’s not easily disrupted by shocks and outside influences.”
At the moment, China remains the world’s largest producer, processor, and exporter of rare earth minerals in the world, representing over 80% of the global processing capacity. While back in the 1950s the U.S. had a strong rare earth metal industry alongside other western nations, the environmental impact of extracting these metals and the by-products produced by extraction ended up discouraging further development of this sector.
China, which didn’t have the same environmental standards, was more than willing to develop its own domestic industry to the point where most of the world began to depend on its exports.
While other resource wealthy nations such as Canada and Australia have a small degree of rare earth production, it is far from sufficient to meet demand from America. Relying heavily on China as their main supplier, this quickly became a major issue when Chinese President Xi Jinping visited a rare earth facility, sparking rumors that the country would use its position as a top rare earth exporter as leverage against the U.S.
With U.S. regulators planning to implement a drastic policy change that would encourage companies to begin extracting and processing rare earths, many analysts are expecting a revival in the industry in the years to come.
However, at the moment there aren’t too many U.S. based stocks that operate in this sector. The vast majority of rare earth stocks are understandably based in China, there a handful of notable exceptions.
Lynas Corp is the main one, an Australian based rare earth producer that’s been trying to expand into the U.S. with a processing facility. Other stocks to watch that have rare earth market include BHP Group (NYSE: BBL), Denison Mines Corp (NYSE: DNN), and Tronox Holdings (NYSE: TROX).