The difference between commodity and stock market investing
Before we delve into the world of rare earths and technology metals, it is important to understand how investing in these raw materials differs from other investments. Unlike stocks or bonds, for example, technology metals and rare earths are not traded on the stock exchange. Their price is determined solely by supply and demand. The market participants are limited to producers, specialized traders and the processing industry. This circumstance has both advantages and disadvantages.
A big advantage is that there is no risky stock market speculation in technology metals and rare earths. Investors invest in physical raw materials and therefore enjoy a certain degree of security from crises. This type of investment also eliminates the often opaque terms and processes on the stock exchanges. Commodities are not financial products, which in turn brings with them significant tax advantages. There is no withholding tax or solidarity surcharge when selling technology metals and rare earths. Income tax is only due if the raw materials are sold within one year of purchase. This tax is also waived if the holding period is longer than one year. In addition, income tax and wealth tax are eliminated.
Another tax advantage is that VAT does not play a role in alternative investments in raw materials. At companies like doobloo AG, these metals are stored in bonded warehouses and delivered exclusively to industrial customers. The current market situation clearly speaks in favor of investing in raw materials as long-term tangible assets. The increasing demand for high-tech products, digital technologies and renewable energies is making these raw materials increasingly sought after. This development is reinforced by the growing world population and the rise of numerous emerging countries to become industrial powers. Nevertheless, raw material supplies are finite, and herein lies the challenge.
Success factors for investing in technology metals: expert opinions in focus
Heinz Muser, the managing partner of doobloo AG, and Dr. Peter Riedi, renowned precious metals expert from Liechtenstein, provides valuable insights into the success factors for investing in technology metals. The following key points were highlighted by the two experts:
1. Growing world population and rise of emerging economies:
-The world population is growing at about one percent annually, resulting in millions of new customers for the industry.
-Emerging countries are developing into wealthy, technology-loving industrialized nations and creating additional demand for high-tech products.
2. Green solutions in focus:
-Climate change and changing legislation are leading to increased interest in green technologies.
-E-mobility, wind energy and solar energy rely on strategic metals, especially rare earths.
3. Complicated Manufacturing and Limited Availability:
-Strategic metals are often obtained as by-products in the production of other raw materials and are therefore dependent on their production.
-The complex separation makes production expensive and complicated, which leads to lower production quantities.
4. Example gallium:
-Gallium is a telling example. It is created as a byproduct of aluminum production.
-The availability of gallium depends on the demand for aluminum, which limits availability.
5. China as a dominant player:
-China has a near-monopoly control system over many strategic raw materials.
-Changes in trade policy or pandemic-related disruptions can quickly lead to a shortage.
6. Challenges of Recycling:
-Recycling strategic metals is complicated and expensive, making it currently uneconomical.
-In addition, recycling often leads to a lower level of purity of the raw material, which can make it uninteresting for the industry.
Given these factors, it is clear that investing in technology metals requires strategic consideration. The increasing demand for high-tech products and green solutions, combined with the complex challenges in the production and availability of these raw materials, makes it a sought-after but also demanding investment field. Investors should therefore carefully consider and rely on well-founded analyzes and expert opinions such as those of Heinz Muser and Dr. Peter Riedi left to make successful investment decisions.
Dependence on China
The majority of technology metals and rare earths come from China, and the country is currently building up its own strategic raw material reserves, which further limits supply. It is unclear when China will end this policy. Unlike gold, technology metals and rare earths are actually consumed. Therefore, doobloo continually adapts the range of raw materials in which investors can invest to the current market and industry requirements. The powders and metals remain in their original packaging, which ensures high liquidability if investors want to sell their investment. Since technology metals and rare earths are needed in many different industries, they offer an investment opportunity that can be considered crisis-proof.
The world of rare earths
Now that we’ve seen the benefits of investing in technology metals and rare earths, let’s take a closer look at rare earths. Rare earths are 17 chemical elements from the third group of the periodic table that occur in the form of metals. These elements never occur alone as pure metals, but only in compounds in ores. A distinction is made between light and heavy rare earths. Over 95 percent of rare earths belong to the light rare earths such as cerium, lanthanum, neodymium and praseodymium. The heavy rare earths such as dysprosium, erbium, europium, gadolinium, holmium, lutetium, promethium, samarium, scandium, terbium, thulium, ytterbium and yttrium make up less than five percent.
Rare earths are crucial for technological innovation. Their extraction process is extremely complex. The ores containing the required elements must be mined and crushed. The rare earths are then extracted from the ores using chemical processes. Each different element composition requires a specific chemical solution, which makes extraction complicated. To make matters worse, rare earths often occur in areas where radioactive elements are also present, making extraction even more difficult.
The diverse applications of rare earths
The versatility of rare earths makes them indispensable raw materials in our modern world. A large proportion of rare earths are used to produce powerful permanent magnets that are used in wind turbines, electric motors, magnetic resonance imaging and headphones. Rare earths also find numerous applications in lighting technology. Europium and yttrium are used, for example, for the production of LED and plasma screens.
Author:
Maximilian Bausch
doobloo AG, based in the Principality of Liechtenstein, specializes in the purchase of strategic metals. She is convinced that every investment portfolio should be expanded to include a tangible asset as a crisis and inflation-proof component. Technology metals and rare earths are urgently needed for almost all high-tech developments in recent years.
Contact
doobloo AG
dr. Peter Riedi
Meierhofstasse 2
FL-9490 Liechtenstein
+423 23 90 117