On Thursday, China announced that it would ease export restrictions on highly sought after rare earth metals.
That took some air out of the boom in rare-earth stocks, but the obsession remains with these elements that are used in iPods, wind turbines, and hybrid cards.
So is there really a long-term crisis, and does China really have a death-grip on rare earths?
There are really good reasons to be sceptical of the mainstream thinking.
This presentation from economist Ed Dolan provides the best, most-concise explanation of the issue that we’ve seen.
It basically comes down to this:
- Yes, China does control 95% of rare earth production.
- But that’s mainly because it has the loosest environmental regulations. They are in abundance all around the world.
- Rare earths aren’t really that rare… they’re more prevalent than gold.
- And demand over the long-run is elastic. Companies are in fact finding alternatives to them.
So before you jump into the rare earth ETF to ride the bubble, at least get some background.