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Molycorp (NYSE: MCP) is set to report earnings on Thursday. A surprise beat or miss could move shares of the company's stock dramatically. Yet, the company's future may ultimately be dominated more so by macroeconomic trends than financial performance.
Molycorp is currently devoted to producing rare earths from locations outside of China.
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Rare earths are minerals within the earth's crust that are used in the production of many modern technologies including wind turbines, electric cars, modern lights, and LCD televisions.
They are known as rare earths because they are relatively rare in the earth's crust. China's Inner Mongolia region currently produces roughly 97% of all the rare earths presently used in the world.
Last month, General Electric (NYSE: GE) released a briefing report on the assessment of the market for rare earths.
As GE notes in their report, China's control of the world's rare earths may be causing some problems. China maintains a strict quota, which limits the amount of rare earths available in the global supply.
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That kind of supply-side pressure may be encouraging companies outside of China, like Molycorp, to aggressively develop supplies of rare earths in other parts of the world.
Benzinga spoke with Brian Chin, an analyst at Gabelli & Co, regarding his assessment of Molycorp.
"Molycorp is the best positioned company in the sector," Chin stated. "China has a virtual monopoly on the current production of rare earths and has been consistent with efforts to limit exports. As the demand for rare earths expands, Molycorp is well positioned to take advantage."
However, Molycorp is not the only company in the sector. Lynas Corp (OTC: LYSCF) is also attempting to develop global rare earth deposits. Still, Chin was not as positive on Lynas.
"Lynas Corp is probably the second best in the sector," Chin explained. "But they have been having some permitting issues with their plant in Malaysia that are holding the company back."
With the demand for modern technology growing, companies positioned in the sector may present great opportunities to investors. Still, as evidence mounts that the global economy may be slowing, now may be a poor time to invest.
Further, the World Trade Organization stated back in July that China's rare earth quota was a violation of international rules. If the WTO is able to pressure China into relaxing its quota, it may prove disastrous for rare earth companies.
Molycorp is currently trading up over 6% on the session, near $54.71. The company is set to report earnings Thursday after the close.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.