Hi all I came across a widely circulated article today on another platform and thought
"finally" the penny is dropping on Rare Earths:
Futurist-types will tell you that we are witnessing the dawn of an investment thematic to out-do all others – the AI-driven rise of humanoid robotics.
There’s no surprise that Tesla’s Elon Musk is a fan of the thematic. He said recently that Tesla’s (androgynous) Optimus robot would be available for sale next year.
In the same breath, he said
the robot could one day drive Tesla’s $US625 billion market cap to $US25 trillion, or more than half of the value of the S & P 500 today.
Musk later followed up by predicting that there will be a market for up to 10 billion robots – one for every person, untold numbers in industry, and of course their military applications.
It was typical grand-standing stuff from Musk but perceptive nevertheless given the US and China are already squaring off as to who will dominate the robot industry.
Perceptive too in that A1 seems to be wonderful stuff but what is the big and disruptive revenue stream it can deliver. Humanoid robots – androgynous or not – seem to be the answer.
But wait HAL, we have a problem.
Electric vehicles are heavy on permanent magnets produced from rare earths but robots take things to the next level.
Musk’s prediction of 10 billion robots doesn’t even have to get close to being on the mark for demand for rare earth magnets to take off into uncharted territory.
It is a subject that US rare earths producer MP Materials raised at J.P. Morgan’s Energy, Power & Renewables Conference in New York on June 17.
MP’s chairman and CEO James Litinsky said
that it was likely that the robots coming our way would have two to three times the magnet content of your average electric vehicle.
More than that though, if demand for the magnet rare earths (NdPr) for things like EVs, hybrids, wind turbines and so was dialled back to zero, there would only enough of the stuff for 50 million robots.
“Certainly not the 10 to 20 billion that are being talked about,” Litinsky said.
“So if you believe one-tenth of that market potential, then certainly
there’s going to be an enormous bull run around the need for incremental supply in NdPr (a number of years down the line.”
His commentary on our robotic future comes as the non-China rare earths industry – essentially the $US2 billion MP and our own $5.5 billion Lynas (ASX:LYC) – is dealing with a brutal bear market in rare earths.
But it can’t go on much longer as even the Chinse producers (80% of the global market) would be losing money at current prices.
And then there is the issue of China having to think about holding back its rare earths exports in support of its own robot ambitions for industry and the military.
So investors in the space don’t need to dream as big as Musk to perhaps start positioning to the robot revolution. Why, if only a fraction of Musk’s crystal-balling comes to pass, even the beaten up rare earth explorers could be worth a look.
It is notable that given all of the above,
Lynas has just stepped up its NdPr separation capability at its operations in Malaysia, and that rare earths developer Meteoric (ASX:MEI) has signed up for a potential supply deal with Latin America’s first permanent magnet maker. Both stocks have been trading at or near 52-week lows.
It is also worth mentioning that MP and Lynas were involved in merger talks earlier this year that did not go anywhere. But bear markets in commodities can force a rethink on these things.
Also, it was reported at the time of the now aborted MP/Lynas merger talks that Gina Rinehart had assembled a 5.8% stake in Lynas, and a 5.3% stake in MP. It is not known if she is a robot fan or not. But robots in the mining industry does seem a natural progression from driverless trucks and remote boggers.
AUTHOR Fitzgerald
OK so this change will not happen over night but it is clear to me that a supply crunch in rare earths is coming and the use of REs in other areas like robots will just make the pressure on supply that much harder to deal with.
I am just praying that the demand and price for RE's becomes more normalised by natural market forces (rather than Govt interventions) in the years ahead and the sooner the better.
Hope you found this article published today useful
Chrs W2
(20min delay)