Rare Earths ETF Down on Molycorp SEC Investigation News
The Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) is trading near its lows of the day on news the Securities and Exchange Commission has launched a formal inquiry into the accuracy of Molycorp's (NYSE: MCP) financial statements.
Colorado-based Molycorp is the largest U.S. rare earths producer and the tenth-largest holding in the Market Vectors Rare Earth/Strategic Metals ETF with a weight of 4.6 percent. The ETF is home to 27 stocks. The U.S., Canada, Australia and China combine for nearly-two thirds of the fund's country weight. China controls 95 percent of the global export market for rare earths.
REMX entered trading today with $158.5 million in assets under management, according to Market Vectors data, indicating the fund has at least proven viable since its late October 2010 debut. The ETF's debut looked like a case of good timing as rare earths demand and prices were soaring at the time REMX came to market.
Some investors bought into the fundamental argument in favor of this sub-sector that included widespread everyday use of rare earths in products ranging from night-vision goggles used by the military to electric cars to smartphones and tablets.
Still, REMX has had rough go when it comes to performance. Although China has often played chicken with its production quotas, threatening cuts to inflate prices, prices for some rare earths have faltered since late 2010. The prices of cerium and neodymium have slid by 80 percent since early 2011, helping to explain why REMX has lost more than 40 percent its debut.
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