by David Fessler, Energy and Infrastructure Specialist
In yesterday's article, my colleague, Louis Basenese, argued that investing in Japan spelled opportunity for long-term investors, but warned of three areas to avoid if you're a short-term trader.
I'm going to pick up the baton and tell you about a little-known area that will play an integral part of Japan's rebuilding efforts – and which could ultimately fare well, once the immediate shock and emotion subsides.
With the global stock markets naturally reacting terribly to the possibility of Japan's nuclear situation going from disastrous to catastrophic, nearly every sector has suffered a beating.
That includes rare earth stocks…
Rare… Critical… And in Demand
In case you don't know, rare earths are a group of 17 metallic elements used in a plethora of consumer and industrial products. Many people don't know anything about them, but they're found in televisions, cars, cellphones, radar systems, fiber optic devices, wind turbines and many more.
Take the latter, for example. Rare earth elements are crucial to wind turbine manufacturing. Why? Because wind turbines contain very large magnets that are part of the generator that produces electricity from the spinning blades.
Each one-megawatt generator uses as much as one ton of the rare earth metal, neodymium, as well as other rare earths.
Simply put, our way of life wouldn't be possible without rare earth elements. They're vital to all economies… including Japan's.
Trouble is, Japan is the largest importer of rare earths from China (which is responsible for 95% of global rare earth production), gobbling up about 50% of Chinese rare earth exports.
So what do you need to know?
With Nuclear in Trouble, Alternative Energy Will Grow… and So Will Rare Earths
Former Bank of Japan Deputy Governor Toshiro Muto says Japan's rebuilding costs from the current disaster could hit 20 trillion yen ($245 billion).