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It's no secret that ASX 200 mining shares have been strong this year alongside rising commodity prices.
When ASX investors think of mining, the 'Big Australian' — BHP Group Ltd (ASX: BHP) — probably comes to mind first. But that's just history talking. Australia has a broad commodity mix to offer the world, and two of the hottest mining industries right now are rare earths and lithium.
Australian rare earths are in demand because China is, by far, the world's biggest supplier. But China's increasing aggression towards the West means plenty of governments around the world want to buy from other countries now. Luckily, Australia is the world's second-biggest supplier.
Rare earths are used to make smartphones, wind turbines, aircraft engines, and hybrid cars. One of the ASX 200 mining shares benefitting from current high demand is Lynas Rare Earths (ASX: LYC).
In an interview with Livewire, Tom Richardson from Paradice Investment Management says Lynas is a buy. He argues it's a great company to leverage the global energy transition.
Richardson said:
It's rare earths, NDPR, goes into high-strength magnets, which is absolutely required for EVs and wind turbines, so it's absolutely an enabler of the energy transition.
Lynas is the best-placed company in the world, in our opinion. It has the best asset.
China completely dominates the supply chain, and everyone's trying to work out how they can unpick that. And they're in the predominant position and we think the commodity price probably goes higher over the next three years.
Richardson is also backing global lithium producer Allkem Ltd (ASX: AKE).
Lithium is a key component in the batteries that make electric vehicles (EV) run. The burgeoning EV industry is one of the reasons why ASX lithium shares have been so popular over the past couple of years.
So, Richardson also rates this ASX 200 mining share a buy:
It's a buy, absolutely. China is still the biggest buyer in the market, and it looks as though their battery production actually is inflecting up.
And there's a lot of short interest in all these names. They might get caught by the demand strength in China. And maybe prices even go higher, not lower like people are expecting.
Luke Smith from Ausbil Investment Management also says Allkem is a buy:
We strongly disagree with the negative view around lithium. We've seen pricing strength, and demand backdrop is extremely strong and strengthening. Allkem, three growth assets, puts it on par with the majors.
