Rare earth metal supply is growing at a rate of 5% per year.
Most of the supply/reserves come from China and U.S.A.
The most used rare earth is Neodymium, so we need to watch the price of that rare earth metal and we will know the rest of the market as well as they all move in sync.
Demand was projected to be 10% per year. This will increase as more clean energy demand will arrive.
Here are some good rare earth plays outside China.
Neo Performance Materials is a speculative play on the China rare earth export ban.
What you want to do is filter on 4 attributes: market cap, P/E, dividend yield and percentage change.
1) Market Cap: do not choose small companies as they are mostly fraudulent or don’t have sustainable earnings. Don’t choose big companies because these are not volatile enough to get fast profits from. I’d filter between 200 million and 4 billion.
2) P/E ratio: choose the companies with the lowest P/E ratio, these companies are dirt cheap while still having earnings. Cheap is below P/E of 5. But do not choose below P/E of 2 because those are mostly companies that are going bankrupt or have bad growth.
3) Dividend yield: always choose companies that have dividends, because these companies have real earnings and can prove they have sustainable earnings to reward investors. The higher the better of course, but don’t push it above 7% as those companies probably don’t have the money to pay out dividends on a regular basis. I’d go for companies with dividends between 3% and 7%.
4) Volatility: don’t choose companies that are so volatile. Maximum year over year change should be between the 20% range.
China rare earth exports have declined, due to export ban speculation. Exports declined to 3,640 tons last month, down 16% from April and an 18% drop from a year earlier, according to Chinese customs data on Monday.
Rare earth prices have come down to historic levels.
Correlation Economics (Backup) 