What even are rare earths and why are ASX shares with exposure always in the spotlight?

Rare earths are crucial to most every high-tech gadget you own.

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Key points

  • ASX shares exposed to rare earths in the spotlight
  • China still controls lion's share of market
  • Western world looking for new critical materials supply lines

ASX shares with exposure to rare earths often find their way into the media headlines.

And for good reason.

Most of the ASX shares exploring for and producing rare earths have seen their share prices far outpace the broader index.

Here’s what we mean…

ASX shares exposed to rare earths racing ahead

Over the past 12 months the All Ordinaries Index (ASX: XAO) is up 6.47%.

Over that same time, ASX rare earths share Australian Strategic Materials Ltd (ASX: ASM) has gained 71%. And the Iluka Resources Limited (ASX: ILU) share price has rocked 61%.

Hold on. We’re not quite done yet.

Competitor ASX shares involved in rare earths include Dreadnought Resources Ltd (ASX: DRE), up 138% in 12 months; Hastings Technology Metals Ltd (ASX: HAS), up 41%; and Lynas Rare Earths Ltd (ASX: LYC), whose share price is up 86% since this time last year.

See what we mean?

What the heck are rare earths anyway?

To start off with, rare earths aren’t really all that rare as far as how much of them you can find across the Earth. But they earn their name because they’re generally only found in very low levels of concentration. Meaning to get to them, companies like the ASX shares listed above need to sort through a whole bunch of ore first. And then laboriously filter the choice bits out.

Depending on who you ask, there are either 15 or 17 rare earth elements (REEs).

Regardless of how many elements we choose to put into the category, you’d be hard-pressed to find anyone who can name them all. Or even a few.

Praseodymium anyone? How about gadolinium? Or maybe ytterbium?

We’ll leave off the rest of the list. (To impress your friends, you can find that list here.)

Yet, while they’re hardly household names, rare earths are critical to almost every high-tech gadget you own. Including the smartphone or computer you’re probably using to read this right now.

They’re also important to the move to green energy, used in the construction of things like wind turbines.

But there’s an arguably bigger reason ASX shares working in the rare earths space are frequently in the spotlight.

That’s because these elements are crucial to modern militaries across the world. We’re talking satellites, missiles, submarines, high-tech ground vehicles, and all manner of aircraft here.

Just how dependent are these military machines on rare earths?

Very.

Roughly 418 kilograms of rare earths are used to make a single F-35 Lightning II fighter jet. And some 4,100 kilograms are required before an SSN-774 Virginia-class submarine can head off to duty, according to a 2013 United States Congressional Research Service report.

Why are so many ASX shares involved with rare earths?

While the West is moving to break China’s stranglehold, the Middle Kingdom still controls some 70%-80% of the REE market.

As tensions with China have increased over the past few years, the United States and other nations have been increasingly turning to Australia to fill any potential shortcomings in their REE supplies.

And Australia is well placed to do so.

According to the CSIRO’s Critical Energy Minerals Roadmap, Australia has the sixth-largest deposit of economically viable rare earth elements of any nation on the planet.

And the ASX shares listed above are working hard to secure those crucial resources.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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