Fears that Chinese hoarding of rare earths would lead to global shortages hit the market this week.
The government has stopped issuing licenses for new exploration until mid 2011. It has also capped production at 892,000 tonnes for this year.
This comes in the wake of efforts to shut down widespread illegal mining that was causing massive environmental damage. Rare earth industry officials in the Middle Kingdom are clearly lobbying for measures that will lead to higher prices.
I think the rare earths space, which includes obscure elements like cerium, lanthanum, and neodymium, is going to become a great long term play.
Not only are they essential for modern electronics applications like electric cars, lasers, and cell phones, but they also play a crucial defense role in missile guidance systems, night vision glasses, and GPS systems.
Keep Avalon Rare Metals (AVA.TO), which has dropped by half in eight months, on your short list to buy on dips.
Article courtesy of: The Mad Hedge Fund Trader