Rare Earths ETF Tops Its Lithium Rival

The Global X Lithium & Battery Tech ETF LIT has been getting plenty of attention in recent weeks and rightfully so. LIT, the lone dedicated lithium equities exchange-traded fund, is seeing investors rush in as lithium demand skyrockets. LIT is responding with a one-month gain of almost 18 percent, which pushes its year-to-date gain to about 51 percent.

Another ETF that is another play on the periodic table of elements is surging as well. The VanEck Vectors Rare Earth/Strategic Metals ETF REMX is higher by almost 23 percent over the past month and up nearly 53 percent year to date.

REMX debuted in late 2010, three months after LIT. Over those almost seven years on the market, REMX has endured good and bad times. The ETF soared on an expected boom in rare earths demand and supply concern only to later slump as China, the world's largest producer of rare earths, moved to ease supply issues, reducing prices in the process.

Redemption In 2017

As the rare earths investment thesis took its lumps, some investors glossed over REMX. As Sept. 12, the ETF had nearly $85 million in assets under management, putting it almost $400 million behind LIT. However, some data points suggest investors are missing out by ignoring REMX.

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The demand thesis for rare earth minerals remains robust as these minerals are essential ingredients in a vast array of products including electric vehicles, smartphones and tablets. Not to mention consistent demand from the world's defense contractors and armies as rare earths used to make military products, including night-vision goggles and missile guidance systems.

China “has also set production caps and export quotas on the metals, which has contributed to the rising prices. The EU, U.S. and Japan have even petitioned the World Trade Organization, claiming China is unfairly choking off exports to benefit domestic industries,” according to ETF Trends.

A Direct Play

REMX is the only game in town when it comes to rare earths ETFs. The fund tracks the MVIS Global Rare Earth/Strategic Metals Index and holds just 21 stocks. China and Australia combine for 60 percent of the fund's geographic weight while one U.S. company, Tronox Ltd TROX, is about 6.3 percent of the fund's roster.

Investors still need to be mindful of China's impact on the rare earths market.

“However, with prices rising, China also has the ability to keep the increase in check as it is sitting on an unknown amount of stockpiled rare earth metals, which may be released into the markets. The country is a leader of green technology, such as solar panels, and it is in its own interest to keep rare earth prices lower,” added ETF Trends.

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