Rare earths – an investment product?

A set of 17 elements are described as rare earth metals, and thus appear in the periodic table of elements. However, this term is misleading, because many of these pure substances are found more frequently in the earth’s crust than gold or platinum, for example. These raw materials are primarily used in industry where they are much in demand.

Rare earth metals – also called Rare Earth Oxides (REO) – have been known in Europe since the 18th century. The term “rare earth elements” was coined at this time, because their discoverers assumed their occurrence should be classified as rather limited. Furthermore, they are oxidized from minerals, which is why the term “earth” was used, this being an older term for oxides.

Rare earth elements are relatively soft, silver-coloured metals. And like silver and other white metals, they tarnish quickly when exposed to air. They offer strong electropositivity and low conductivity, and some of these metals have special functions. For example, gadolinium adheres to magnets in a similar way to iron, and lanthanum has superconductor properties.

Rare earths always occur together, never alone, and they tend to appear in combinations as groups of similar elements. For this reason, these 17 earth elements can be roughly divided into two sub-groups of cerite earths (atomic numbers 58 to 64) and ytter earths (atomic numbers 65 to 71). A distinction can also be made between light and heavy rare earths.

Rare elements in the periodic table

On average, the light rare earth elements lanthanum (57), cerium (58), praseodymium (59) and neodymium (60) account for more than 95 percent of rare earth metals. The rest occur in much smaller proportions, and comprise a group consisting of the heavy rare earths scandium (21), yttrium (39), promethium (61), samarium (62), europium (63), gadolinium (64), terbium (65), dysprosium (66 ), holmium (67), erbium (68), thulium (69), ytterbium (70), and lutetium (71). With the exception of scandium and yttrium, all earth elements follow lanthanum in the periodic table of metals, which is why they are called lanthanides, or lanthanoids.

The lanthanides are listed in the periodic table of elements on the second row up from the bottom.
Image of the periodic table of elements
© Stefan Yang - stock.adobe.com

Where are rare earths mined and processed?

Rare earth elements do not occur as pure metals or oxides, but have to be extracted from ores. They are found as a compound substance, particularly in the minerals bastnaesite, monazite and xenotime. Their occurrence is mainly concentrated in Australia, Brazil, China, India, Madagascar, Myanmar, Russia, Thailand, USA and Vietnam. More than half the world’s production comes from the Bayan Obo mining district in China’s Inner Mongolia. Other mines important to the world market are Mountain Pass in the US state of California and Mount Weld in Western Australia.

According to Statista*, around 240,000 tonnes of REO were mined worldwide in 2020. China accounted for 140,000 tonnes of this total, while the USA contributed 38,000 tonnes. Significant amounts were also mined by Myanmar (30,000) and Australia (17,000). For European industry, this creates a further dependence on China as an important trading partner.

Rare earths are usually processed directly inside the mines, and at certified refineries. Since these individual metal elements are remarkably similar and can often only be distinguished by weight, the separation process is particularly complex. The pure proportion of rare earth metals extracted from the original ore is between 30 and 60 percent, depending on the mineral classification. In addition, the processing technology is subject to strict environmental regulations, because the rocks contain a low concentration of the radioactive element thorium (90) and other toxins.

The industrial applications of rare oxides

Rare metal oxides are required in many branches of industry, and tend to be used wherever powerful permanent magnets are required. The main areas of application are wind turbines, electric vehicles and magnetic resonance tomographs. However, these chemical elements are also in widespread use in media technology products, such as headphones, loudspeakers and plasma screens, as well as in notebooks, smartphones and daylight LED headlights.

Experts assume that the future belongs to terbium, dysprosium, neodymium and the like. High-tech applications such as the 5G mobile communications standard or modern X-ray technology would no longer be feasible without rare earth metals. In addition, the use of renewable energies cannot be implemented without the use of high-performance raw materials. Thus the demand for these elements is likely to increase further in the coming decades.

Which rare earth metals attract investor interest?

The four rare earths dysprosium, neodymium, praseodymium and terbium are of fundamental importance for industry, and are thus in use worldwide. And due to this high global demand, these strategic metals also represent important investment products, especially given the high value density of the isolated oxides. Rather like gold or silver, they never lose their value and can always be re-processed to create new products. Cast as ingots or in powder form, these rare earth oxides are ideal for storage and can be further processed by almost any branch of industry.

Neodymium, a rare earth metal used as a magnet in many devices.
Image of a nugget of neodymium
© RHJ - stock.adobe.com

Investment in mining company shares is already widespread today. And beyond this, investors can source special equity funds and index certificates in the rare earth market. Direct investment in physical oxides via metal traders has also become an increasingly viable option. Trading companies offer bundles in different denominations, for example in lots of one or ten kilograms. While these are mainly sold to industry, they are also purchased by private investors.

Purchasing rare earths is an alternative form of investment, and these tangible assets may offer some advantages over the purchase of shares or other precious metals. Rare earth oxides are not often traded on the stock exchange, so their price mostly depends on the forces of supply and demand in the spot market.

Price development in recent years

Although rare earth elements have not yet become common investment products, a new asset class could be emerging, and the price development over recent years would seem to confirm this view. However, unlike gold and silver, there are no price overviews for rare earths due to the lack of market data. So the price development can only be shown as a percentage plus approximate valuations. The actual prices will invariably depend on the purchase quantity and the current demand. So when selling rare earths, there remains the possibility that no buyer might be found, especially when marketing large quantities. Investors must take this into account when making their investment decisions.

Expensive samarium magnets are used in aerospace and other industries.
Image of a samarium nugget
© Björn Wylezich - stock.adobe.com

Proper storage is all-important

As with all other material assets with a high value density, professional storage and appropriate insurance cover is recommended for rare earths as an investment product. This can be arranged in Switzerland outside the banking system, for example, with Swiss Gold Safe, a specialist storage company. Here, investors can arrange segregated storage for their rare earths. This means investors will always be able to retrieve the exact same products they originally consigned to storage. This is particularly important in the case of rare earth metals where owners must be able to deliver the high quality demanded by industrial users.

In addition, Swiss Gold Safe also offers rare earth storage in duty-free warehouses. This enables investors to buy, sell and store their holdings free of VAT – regardless of the holding period.

Rare earths: an overview