The first U.S. exchange-traded fund (
) investing in companies that produce rare-earth elements and other
strategic metals began trading this morning on the NYSE Arca Stock
Managed by Van Eck Global, the Market Vectors Rare
Earth/Strategic Metals ETF trades under the symbol REMX.
The ETF tracks an index comprising of 24 mining companies
including Iluka Resources Ltd., the world's biggest zircon
producer, China Rare Earth Holdings Ltd., a Hong Kong-based
manufacturer and wholesaler of rare-earth products; and Titanium
Metals Corp. (
Rare-earth prices have recently soared after the world's
dominant supplier China (which provides more than 90 percent of
global supplies) reduced cut its second-half export quota.
According to Van Eck, rare earth/strategic metals are industrial
metals that are typically mined as by-products or secondary metals
in operations focused on precious metals and base metals. Compared
to base metals, they have more specialized uses and are often more
difficult to extract.
At present, 49 elements in the periodic table are considered
rare earth/strategic metals.
Rare earth metals are crucial to many of the world's most
advanced technologies, such as cellular phones, high performance
batteries, flat screen televisions, green energy technology, and
are critical to the future of hybrid and electric cars, high-tech
military applications and superconductors and fiber-optic
Writing in the 24/7 Wall St. blog, John Ogg comments that "rare
earth oxide and rare earth element companies are by and large still
very much niche and emerging companies, many of which have little
to no revenues."
If the Van Eck ETF becomes successful, Ogg adds, "it will have
the unfortunate effect of running up stocks to the point that just
being in the ETF would allocate too much ownership by an ETF and
that in turn creates a phantom valuation premium in the underlying
Ogg adds that rare earth elements are not exactly "rare" by
"What is rare about them is that the quantities of locations
capable of being mined at cost-effective commercialization are
rare," he said.