This holds exposure to U.S companies that manufacture commercial and military aircraft and other defense equipment, these companies hold great dependency on rare earth materials, so its costs hold a key significance on its margins, which might get a lift due to the most recent news coming from the key producer of rare-earths.
China that controls about 90% of the market, and 70% of the global production of rare earths, said this month that it's raising its annual mining quota to 132,000 tons, representing a 10% rise in comparison with last year. This decision's poised to have a significant impact on the markets due to the relevance of rare-earth is one of the most relevant elements to the modern industry, essential to the production of a wide variety of products. To have an idea, let's have a quick look at their uses on the industry:
Neodymium - Used to make powerful magnets that can be use on the many products from computer hard drives to motors for electric cars
Lanthanum - Used to make audiovisual components like camera lenses and other elements that work with light on the industry like cinema projection and illumination.
Gadolinium - Used on the fabrication of Television screens in the medical industry by been utilized in MRI and X-ray scanning systems.
Cerium - Used in the manufacture for cigarette lighters, as the Lanthanum it's used on the cinema industry, this element it’s also used by the crude refinery in its refining process.
Praseodymium - Essential to producing aircraft engines and along with magnesium, can create high-strength metals named Mischmetal.
Yttrium - Used in white LED lights, lasers that can cut through metals, also it's used in making of microwave filters for radars, and it's used to a catalyst in ethene polymerization.
Terbium - Used in mercury lamps and to improve the safety of medical x-rays and used in laser devices.
Europium - Used in printing euro banknotes, low-energy light bulbs to give natural light, also it's excellent at absorbing a neutron, valuable to control rods for nuclear reactors.
With this scenario in mind, we can weight that companies and other types of assets, that have a high level of dependence on this material could have relief on their profit margins during this year that China keeps this level of production. This relief might mitigate eventual headwinds that these assets may face and boost possible sentiments.
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