Here’s Why Rare Earth Metal Shares are Spiking Now

In a somewhat shocking announcement, China’s Ministry of Land and Resources has tightened controls on mining, processing, and selling rare earth metals (REMX) used in hi-tech manufacturing. When supply goes down, prices rise. Good news for stocks.

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China (NYSE:FXI) accounts for 30 percent of the world’s mining reserves of rare earths, and 97 percent of the world’s production. Vice Minister, Wang Min has called them the “vitamins” of modern industry, as they find application in high technology products such as mobile phones, flat-screen TVs, batteries for electric cars, wind turbines and weaponry.

The embargo is centered on the three main mining areas of rare earths – Inner Mongolia, Shandong and Sichuan. The justifications cited for the crackdown include conserving China’s “21st century treasure trove of new materials,” and “sustainable and healthy development.”

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This is likely to further alarm global manufacturers, already protesting China’s reduction of exports of rare earths to give a leg-up to its domestic industry.

Rare Earth Metal stocks to watch: Molycorp (NYSE:MCP), Avalon Rare Metals (AMEX:AVL), Thompson Creek Metals Co. (NYSE:TC), General Moly Inc. (AMEX:GMO), and PolyMet Mining Corp. (AMEX:PLM).

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