The 89th Geneva International Motor Show will be ending on 17 March. Until then visitors can gaze in awe at more than 900 vehicles, including over 150 making their European or world débuts. The highly regarded trade fair also offers a peek into the future of mobility. Whether small start-ups or traditional mass manufacturers, the companies have put their latest models with battery, hybrid or even fuel cell drives under the spotlight in the west of Switzerland. “Our future is electric”, said BMW boss Harald Krüger, for instance, at the motor show. The DAX group is presenting four new plug-in models in Geneva, including versions for its popular 3 and X3 series. Volkswagen is showcasing the ID. Buggy, among other vehicles. The group would like to sell more than 100,000 all-electric cars overall in the next year alone. And of course there's no shortage of Chinese competitors: at its stand Shanghai-based supplier Aiways is presenting the U5, a mid-range SUV that the company hopes will enable it to penetrate Europe.
It's not only technology nerds and environmentally aware consumers who should welcome the transformation in the automotive sector: the suppliers of rare earths must also be rubbing their hands with glee. These metals, also known as rare-earth elements, are just as centrally important for the huge trend towards e-mobility as they are for a raft of other high-tech industries. Rare earths are defined as lanthanum and the 14 elements following lanthanum in the periodic table, known as lanthanides. Since these substances only occur together, they can also only be mined together. They are divided into light and heavy rare earths, although the adjective “rare” is not quite correct: these metals are actually (still) relatively plentiful. The crux is extracting them from the respective base rock. This requires complex metallurgical processes. View more information on investment solutions on the topic “Rare earths: the beating heart of technological change”.
In electric cars it is the elements neodymium (Ne) and dysprosium (Dy) that are mainly to be found. They are needed for high-quality neodymium-iron-boron magnets, which are also installed in the motors of wind turbines, for instance. These metals are particularly frequently used in alloy form as well, such as for NiMH batteries. Among the most important areas of application (see graph) are illuminants. The rare earths europium (Eu), terbium (Tb) and yttrium (Y) are some of the basic substances used in energy-saving lamps. The global production of rare earths is dominated by China. According to Statista, in 2018 the Middle Kingdom produced 120,000 tonnes of rare earth oxide (REO). The second largest producer, Australia, managed just one sixth of this total (see graph). China has increased the yield from its mines by a good 14% in the last year. Across the world production actually climbed by just under 29%. This development suggests that the mega trends mentioned above are driving the demand for rare earths.
While the raw materials themselves are traded on dedicated metals exchanges, a number of companies in the sector also find themselves on the list of stocks. These instruments experienced some hype in 2011, when concerns about a shortage of rare earths drove the prices of both raw materials and shares to unprecedented highs. The next year brought disenchantment, with the sharp falls in quotations causing many of these companies to disappear from the radar of many investors again. Given the positive outlook, it could be well worth while having another look at the sector. For this subsector and for the spectrum of raw materials shares as a whole, however, it should be borne in mind that these are occasionally very speculative instruments. Mistakes or setbacks in the exploration of metals, for instance, could have a rapid and significant impact on the share price. For that reason alone, it makes sense to diversify any investment in what is such an important segment for technological change.
VIEW MORE information on investment solutions on the topic “Rare earths: the beating heart of technological change”.