Molycorp’s CEO announced the company’s revenues are in fact rising, proving to skeptics that rare earth metal companies are more than just momentum stocks.
Moreover, pricing and inventories are moving into a very favorable state. Prices are escalating beyond $100,000 a ton — up 9 times from last year. Global supply is also shrinking as China (NYSE:FXI) has restricted exports.
China GengSheng Minerals (AMEX:CHGS) manufactures monolithic refractory products and industrial ceramic products. The Company also manufactures fracture proppant products. All of these products have been in high demand as emerging markets (NYSE:EEM) continue to build out. Now that Japan (NYSE:EWJ) will need to rebuild for years, demand for these rare elements will only increase.
For the long term, the question is not whether investors should own rare earth stocks, it’s a matter of whether the prices are right. With an artificial cap on supply, now might be too high a risk of exports are allowed to increase again.
Disclosure: No positions.