The United States to step up production of rare earths: 5 actions to watch

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China was responsible for 80% of rare earth imports in 2019, according to the US Geological Survey. While the pandemic has caused disruption in the supply chain and exports were insufficient last year, the dominance of China in the rare earth market cannot be denied. After all, the country currently holds around 70% of the world’s known reserves of rare earths.

The 17-element group is used in electric vehicles (EVs), batteries, renewable energy systems and a wide range of electrical devices, ranging from smartphones, display panels, speakers, televisions, and more. Cerium and neodymium are commonly used in smartphones, flat panel televisions and LED lamps as well as in F-35 fighter jets and missiles, radar and lasers of the US Department of Defense. Elements like lanthanum are used in petroleum refining.

America is making an effort to improve its game in the production of rare earth elements as several major trends are at play. The administration of President Joe Biden has planned massive investments in climate change technology, and elements of the rare earth elements. rare earths are essential to this change. However, as the name suggests, these elements are not widely available, and the extraction, processing and refining of these elements leads to several political and environmental issues.

Recently, Lynas Rare Earths Limited (LYSCF) received a US government grant of $ 30 million to open a new processing plant with Blue Line. The plant is one of many rare earth production plants that Biden hopes to open in order to increase production and reduce reliance on China for the elements. On July 13, Senate Democrats reached agreement on a $ 3.5 trillion budget plan that includes health insurance expansion, funds climate change initiatives and fulfills other pillars of Biden’s economic program. Democrats hope to pass this budget plan in addition to a bipartisan infrastructure bill, which will surely help the rare earth mining space.

While Biden plans to boost the electric vehicle market, supply chain vulnerabilities could be hurdles. In February, Biden ordered a federal analysis of supply chain vulnerabilities to better invest in overseas mines and boost refining. To solve groundwater and air pollution problems, as rare earth mining creates radioactive waste byproducts, White House presents Responsible Mining Insurance Initiative as a model for the mining industry . This model includes mining companies, unions and advocacy groups, and plans to create environmental and human rights principles for this industry. In fact, it emphasizes obtaining the prior and informed consent of indigenous communities and local residents before mineral processing operations. In addition, mining and processing companies must organize the permanent disposal of toxic waste and build waste treatment facilities.

5 stocks to watch

It may take time for the United States to reduce its reliance on China for rare earth elements, but new government funding will boost production, opening up investment opportunities that investors should pay attention. According to a report by Valuates.com, the global rare earth elements market size is expected to reach $ 3,757.7 million by 2026, up from $ 2,664.5 million in 2020, at a CAGR of 5.9%.

BHP Group BHP is engaged in the exploration, development and production of oil and gas properties, as well as the extraction of copper, silver, zinc, molybdenum, uranium, gold, ore of iron and metallurgical and energetic coal. The company’s expected profit growth rate for the current year is over 100% compared to Zacks Mining – Miscellaneous industry’s projected profit growth of 18.9%. Zacks’ consensus estimate for the company’s current year earnings has been revised up 21.7% in the past 60 days. The BHP group currently sports a Zacks Rank # 1 (strong buy). You can see The full list of today’s Zacks # 1 Rank stocks here.

Social issues MTRN produces rare earth elements PVD for modern technologies and supports most major OEM thin film deposition platforms. The company’s expected profit growth rate for the current year is 57.1% compared to Zacks Mining – Miscellaneous industry’s projected profit growth of 18.9%. Zacks’ consensus estimate for the company’s current year earnings has been revised nearly 1% up in the past 60 days. Materion currently holds a Zacks Rank # 2 (Buy).

Tronox Holdings plc TROX operates mineral sand mines containing titanium as well as enrichment and smelting operations. The company’s expected profit growth rate for the current year is over 100% compared to Zacks Chemical – Diversified industry’s projected profit growth of 27.6%. Zacks’ consensus estimate for the company’s current year earnings has been revised up 6.7% in the past 60 days. Tronox currently wears a Zacks Rank # 3 (Hold).

MP Materials Corp. MP owns and operates integrated rare earth extraction and processing facilities. The expected profit growth rate of this Zacks Rank # 3 company for 2021 is 81.5% compared to the projected profit growth of the Zacks Mining – Miscellaneous industry of 18.9%. Zacks’ consensus estimate for the company’s current year earnings has been revised nearly 29% up in the past 90 days.

Freeport-McMoRan Inc. FCX engages in the mining of mining properties. This Zacks Tier 3 Company’s estimated profit growth rate for the current year is over 100% compared to the forecasted decline in Zacks Mining Industry – Non-Ferrous profits of 1.3%. Zacks’ consensus estimate for the company’s current year earnings has been revised 10.2% up in the past 60 days.

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