Market Overview

Rare-Earths For Dummies (MCP, SHZ, REE, AVL)

It seems like you can't turn on the TV or visit a financial website without hearing about the necessity of rare-earth minerals. But while everyone is aware of them, very few know what they are, why they're important, and why shares of these companies are skyrocketing on a daily basis. In this article, Benzinga has compiled a list of news and stock information to help clear up the confusion.

Last week, China reduced its export quotas for these peculiar minerals, causing great concern among electronics, automobile, and green technology manufacturers.

The reasons why have more to do with the supply chain than the availability of rare-earth minerals, which are mined from the Earth's crust. The United States currently imports 87% of its rare-earth mineral needs from China, despite having some reserves of its own. China, meanwhile, supplies more than 95% of the global market.

Not surprisingly, Chinese export quotas have now become headline news. Without rare-earth minerals, Apple (NASDAQ: AAPL) iPods and iPhones could not be manufactured; Toyota (NYSE: TM) cars would lose their hybrid batteries; General Electric (NYSE: GE) couldn't produce any wind turbines; and General Dynamics (NYSE: GD) wouldn't have any engines to fire up its F-16s.

These are just a few of the many different products that require this hot commodity. If it weren't for Molycorp, Inc. (NYSE: MCP), a U.S.-based company that owns a facility in Mountain Pass, California, this might have been the time to panic. Though the facility may not go online until 2012, Molycorp has gained a lot of attention as the largest domestic rare-earth miner. Analysts Piper Jaffray and Dahlman Rose have taken notice of the firm's market position, adjusting their respective price targets accordingly.

Molycorp has been surging since September 2010, at which point the company's government-regulated “quiet period” came to an end. At that time, Molycorp was trading at $22. Today, Molycorp is trading at roughly $60 per share.

Molycorp isn't the only company benefiting from the need – and potential shortage – for rare-earth minerals. China Shen Zhou Mining & Resources Inc. (NYSE: SHZ) is trading up roughly 19% today. After an early afternoon surge of nearly 2%, Lynas Corp. Ltd. (OTC: LYSCF) is trading closer to yesterday's close of $2.27.

On the other hand, Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) is trading down 3%. Rare Element Resources Ltd. (NYSE: REE) is trading down roughly 5%, and Avalon Rare Metals Inc. (NYSE: AVL) is trading down more than 6%.

As the need for rare-earth minerals increases, these stocks are expected to perform well. But they are not impervious to market fluctuations. In fact, just this morning, Benzinga reported on a rare-earth rumor that suggested the stocks could be due for a sell-off.

Posted-In: Apple Avalon Rare Metals Inc. China Shen Zhou Mining & Resources Inc. Dahlman Rose general dynamics General Electric iPhone ipod Lynas Corp. Ltd. Market Vectors Rare Earth/Strategic Metals ETF molycorp Piper Jaffray Rare Element Resources Ltd. ToyotaLong Ideas News Short Ideas Politics Tech Media Trading Ideas General

 

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