WINDERMERE, Fla. ( Stockpickr) -- If you're looking for a sector that could have huge upside potential, then I would suggest that market players take a very hard look at the rare earth metals stocks.
Rare earth metals are a collection of 17 chemical elements in the periodic table, including scandium, yttrium and the 15 lanthanides. The rare earths metals market was once just a bunch of boring elements that nobody really cared about, but that has changed in a big way as its application has expanded. Rare earths metals are now used in a wide range of applications, including wind turbines, hybrid and electric cars, fuel cells, LCDs, smart bombs, nuclear reactors and lasers. Currently, China supplies over 90% of the world's rare earth minerals.
This huge sea change has created big demand for rare earth metals from companies across the globe. Also fueling the demand will be population growth. For example, as China and India grow, their consumers will want more luxuries items that use rare earth metals.
Just this morning, China announced that it plans to raise export taxes for some rare earth metals by 25% next year. This move by China is seen as an attempt to apply the same tax standard across the entire rare earth metals market. Most analysts don't think this will affect the pricing or demand for the metals. In fact, most companies that are end users of rare earth metals will simply pass along the costs to consumers.Related Article: 7 Stocks to Benefit From Higher Oil Prices Some market observers are concerned that China is going to cut exports and use its rare earth metals supplies for its own projects. This has been true to an extent, but I think that at the end of the day, China will succumb to market demands and realize that there's too much money to be made to shut the entire world out. Also, producers are going to find new supplies and ramp up production in other parts of the world that are friendlier to the global markets for rare earth metals. According to a recent report out of the Energy Department, it currently takes seven to 10 years to obtain permission to open a new mine in the U.S., which is the longest wait time among the top 25 mining countries. Look for this to change rapidly as the U.S. and other nations realize that they must begin new mining projects so they're not held hostage by China. Western nations aren't going to deal with supply disruptions from China for long because they know these key elements are used in too many important markets.