Goldman saw risks to rare earth supply. Three stocks can protect

Goldman Sachs warned investors about the risks of disruption of global supply chains of rare earth metals, which are primarily associated with high dependence on China and geopolitical tensions. Problems in even 10% of companies dependent on this raw material will result in multi-billion dollar losses and inflationary pressure, the bank said. He singled out three companies whose securities will help investors protect themselves from these risks.

Goldman Sachs pointed to growing risks to global supplies of rare earths and other critical minerals, Reuters wrote, citing a note from the bank published Oct. 20.

The main problem is China's dominance in this area: it controls 69% of the world's rare earth metals mining, 92% of their processing and 98% of magnet production, the bank says. At the same time, the disruption of 10% of industries dependent on rare earth metals could result in a loss of $150 billion in economic output - in addition to inflationary pressures caused by shortages, Goldman warned.

Samarium, graphite, lutetium and terbium are particularly vulnerable to export restrictions, Goldman Sachs said. Samarium is important for aerospace and defense, while supply problems with lutetium and terbium could also reduce GDP, he said. Geopolitical risks also threaten to disrupt supplies of cobalt, oil and natural gas, the bank said.

Goldman advised investors on alternative stocks to manage the risk of disruptions in rare earth element supply amid escalating trade tensions between the U.S. and China.

The Australian company specializes in mining and processing of minerals, primarily titanium ores. Since the beginning of the year, Iluka Resources has gained about 50%. This pace indicates growing optimism about demand in the sector and Iluka's position in the supply chain, says Simply Wall Street.

As a result of trading on October 21, the company's securities fell by 0.13 - to 7.5 Australian dollars ($4.87). At the same time, as SimplyWallStreet writes, analysts estimate the fair value of the shares at 6.6 Australian dollars, which is almost 14% below the current value. This raises the question for investors as to whether the hype is outpacing the company's actual fundamentals, the publication added.

Lynas Rare Earths is Australia's largest producer of rare earth elements by market capitalization, CNBC writes. Since the beginning of the year, the company's shares have soared by almost 200% on excitement about rare earth metals, but quotes are volatile, TechStock2 notes.

Thus, on October 8, shares reached a 14-year high after the announcement of Australia's partnership with the United States. However, profit taking followed: on October 17, the securities collapsed by about 10%, which was the worst one-day drop since 2021.

According to TipRanks, the average target price for Lynas shares is A$14.2 ($9.2), indicating the stock is 33% overvalued compared to its current price Analysts warn of the stock's high volatility and recommend considering downside risk when planning transactions, TechStock2 adds.

MP Materials operates the Mountain Pass mine in California. It is currently the only active rare earth element mine in the United States, producing neodymium and praseodymium, which are essential for high-tech industries.

The company has partnerships with the U.S. Department of Defense and Apple. The deal between the government and MP Materials, which provides for a floor price on the manufacturer's key products, has lifted its shares by almost 437% since the beginning of the year, Barron's emphasizes .

Baird analyst Ben Kallo set a target price of $80 for the securities, based on a 23x multiple to 2030 forecast EBITDA. This implies a 2.4% decline from the current level of $82.

This article was AI-translated and verified by a human editor