Join the rush for rare earth metals

Rare earth metals are an invaluable industrial resource. And with consumption far outstripping supply, their price has shot up. Eoin Gleeson considers the case for investment, and tips two of the best bets in the sector.

The conflict over rare earth metals has just hit Defcon 1. Having steadily reduced the supply of the metals for the last few years, China has just taken the shock decision to slash its rare earth exports for the rest of the year by 72%. Such a huge reduction in quotas means that official Chinese exports for 2010 are now well below global consumption. And that's a nightmare for Western industry.

Rare earth metals have emerged as an invaluable industrial resource in the last two years. Their weight and magnetic properties make them ideal for the production of everything from electric vehicles to wind turbines to iPhones. A small quantity of dysprosium, for example, can make magnets in electric motors 90% lighter, while terbium can help cut the electricity usage of lights by 80%.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.