Rare Earth ETF Jumps

Barron's, Murray Coleman

Shares of the Market Vectors Rare Earth/Strategic Metals ETF (REMX) are up around 2% on reports that a movement to diversify production and diminish China's grip on the market may have suffered a setback.

Australian miner Lynas (LYC) is falling more than 8% after Malaysia's government put new restrictions on a plant due to start producing thousands of tons of the materials within months. The $730 million plant was expected to produce about one-sixth of the world's supply of rare earth elements, according to a Dow Jones Newswires report. China controls +90% of global production and has been limiting its exports, raising global concerns about shortfalls in supply.

Lynas said today it still will be able to meet targets to start operations at the site as soon as September, though analysts are expressing doubt.

Separately, Japan's Showa Denko is making plans to shift some production of high-performance magnetic alloys used in hybrid cars to China this month. The company, which controls 40% of the local market, has avoided overseas production to protect proprietary technologies. Now, the company has decided it will have to move output to China to ensure stable supplies, according to reports.

Molycorp (MCP) is up 6.6% and Rare Element Resources Ltd. (TSX:RES; NYSE.A:REE) is ahead by 4.8% so far.