If you've heard about rare earth elements or rare earth oxides, there's a good chance you've learned about them recently, most likely in news reports about China reducing exports of the elements. Currently, China supplies 97% of the rare earth minerals used in applications as diverse as batteries for electric and hybrid cars to missiles and tanks, so a threat to supply gets noticed by government officials and by the share prices of the few Western companies supplying the magic ingredients.
Like the high ore concentrations required to make mining rare earths economically feasible, options for investing in the space are well ... rare.
But that was before concerns about China's willingness to provide an unfettered supply of rare earths to the market emerged. Since then, Molycorp shares have more than doubled. Other Western rare earth shares have performed similarly. Canadian miner Rare Element Resources'
But will these share prices make sense longer term? The current market cap of Molycorp alone exceeds last year's global sales of rare earth minerals. Sure, demand for rare earths is growing, and the prices for the elements have skyrocketed, but those prices could fall just as quickly as they rose. If supply from China proves reliable and current supply concerns fade, watch for these shares to fall like rocks.
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Fool contributor April Taylor, does not own shares of the companies mentioned. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.