Rare earths and the VanEck Vectors Uncommon Earth/Strategic Metals ETF (REMX) are within the highlight, and never simply because demand is hovering for a sizzling new tech gadget.
Slightly, these important minerals, that are used to supply an array of shopper and army merchandise, are receiving renewed consideration due to the U.S. departure from Afghanistan. That opens the door for China, which already controls greater than 80% of the worldwide uncommon earths market, to probably entry Afghanistan’s estimated $1 trillion in uncommon earths reserves.
Regarded by way of the lens of funding implications, it is not shocking that VanEck’s REMX is up practically 10% over the previous week.
When it debuted practically 11 years in the past, REMX was derided by some naysayers as being too narrowly targeted and too thematic. As we speak, it is flirting with $1 billion in belongings beneath administration, sporting a price ticket north of $100 and up 69.1% year-to-date — all factors highlighting the significance of uncommon earths on the worldwide stage.
Because the state of affairs in Afghanistan proves, uncommon earths carry geopolitical implications, and the U.S. want to scale back dependence on international sources (China) for these supplies. The Protection Division beforehand tried to stockpile uncommon earths, and Congress is getting concerned in an effort to rejuvenate home uncommon earths mining with final week’s introduction of the Uncommon Earth Magnet Manufacturing Manufacturing Tax Credit score Act of 2021.
The bipartisan laws “would give a tax credit score of $20 per kilogram of uncommon earth magnet produced domestically within the US. The tax credit score will increase to $30 per kilogram if all part uncommon earth materials is produced or recycled within the US,” stories Mary Hui for Quartz.
Underscoring how far behind within the uncommon earths race the U.S. has fallen, the world’s largest economic system represents simply 12.45% of REMX’s geographic weight as of July 31, whereas China sits at 47.28%, in line with issuer information. None of REMX’s prime 10 holdings, a gaggle that mixes for roughly two-thirds of the fund’s roster, are US-listed corporations.
There are another bipartisan efforts to assist the U.S. uncommon earths business. The “’Reclaiming American Uncommon Earths (RARE) Act,’ launched in April, would amend federal tax regulation and put in place everlasting tax deductions for the home mining of crucial minerals together with uncommon earths,” in line with Quartz.
On Capitol Hill, issues at all times take time to shake out, but when the U.S. asserts itself on the uncommon earths stage, that would truly profit REMX if the fund’s US-based holdings are capable of carry extra provide to market.
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