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China Creates China Rare Earth Group To Tighten Control Over Rare Earth Supplies

China Creates New State-Owned Mining Giant To Tighten Control Of Rare Earth Supplies

Now that aggressive foreign policy toward China has attracted…

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This article was originally published by Zero Hedge

China Creates New State-Owned Mining Giant To Tighten Control Of Rare Earth Supplies

Now that aggressive foreign policy toward China has attracted bipartisan consensus, evidenced by the fact that President Biden has opted to keep certain tariffs imposed by the Trump Administration in place, Beijing is looking for new ways to squeeze Washington. For years now, we have been warning about the risk of China cutting off supplies of 17 rare earth metals critical for the production of tech gadgets.

Earlier this year, we reported that Beijing was keeping a rare-earth export ban in its “back pocket”. Now, it appears the CCP is moving to tighten state control over rare earth production so that they might more easily control who gets the metals.

Whereas rare earth metals were previously mined by six major Chinese firms, the CCP is merging assets from several state-owned firms to create China Rare Earth Group. The new mining giant will be based in resource-rich Jiangxi Province; it’s expected to allow Beijing more leverage over the supply, and by extension, the price, of these incredibly valuable commodities that are essential for the production of chips and other components used in high-tech products from computers to weapons systems.

China is believed to control up to 90% of global supplies of rare earth metals. Only a small number of rare earth mining operations exist outside China. As for where the rest are mined, the chart below offers some insight.

Some say China’s control over the global market for rare earths is diminishing, but the truth is this is only slightly true.

Infographic: China's Rare Earth Monopoly is Diminishing | Statista You will find more infographics at Statista

Washington has long worried that Beijing might use its control over rare earth supplies toward “strategic ends”, and WSJ reports that the this latest push to consolidate the industry comes at a time of “increased sensitivity” toward the West. Beijing has also cited environmental concerns, since opening new mines can irradiate entire neighborhoods.

The US has taken some steps to encourage more rare earth production in Australia, a staunch ally that has also recently curried Beijing’s wrath. Back in February, the US Defense Department signed a technology investment agreement with Australia’s Lynas Rare Earths which the Pentagon called “the largest rare earth element mining and processing company outside of China.” According to the terms of the deal, Lynas will establish a light rare-earth processing facility in Texas. President Biden has also issued an executive order naming rare-earth minerals as one of four key areas in need of more robust policy options to reduce supply-chain risks.

A visit in 2019 to a rare earth refinery by President Xi was seen by many as a sign that rare earth miners had finally “arrived”, to use vague economic parlance.

Beijing has been coy about its plans. ‘China has no intention to use rare earths as a countermeasure against any country,’ the state-run Global Times wrote earlier this year, However, it added that this remains an option when “foreign companies hurt China’s interests.”

Tyler Durden Fri, 12/03/2021 – 12:16

Author: Tyler Durden

Energy & Critical Metals

Tesla Stock Will Be a Self-Driving Winner. Canada Is Just the Start.

As the electric vehicle race has heated up, investors have been waiting anxiously for self-driving technology to progress. Elon Musk has long had his eye…

As the electric vehicle race has heated up, investors have been waiting anxiously for self-driving technology to progress. Elon Musk has long had his eye on this this area of automotive innovation. He initially predicted that the full self-driving (FSD) beta would be available before the end of 2020. At the end of that year, he tweeted that the beta would be “extended to Canada very soon.” Things didn’t exactly go according to plan.

A black Tesla (TSLA) Model S is parked between rows of charging stations.Source: Grisha Bruev / Shutterstock.com

While Tesla’s (NASDAQ:TSLA) history with missing deadlines is well documented, it hasn’t stopped the company’s progress. Now, investors waiting for the Canadian FSD launch may be in luck. Earlier this week, Must tweeted an update that, if accurate, will could boost Tesla stock significantly.

What’s Happening With Tesla Stock

On Jan. 16, Musk responded to the 2020 Twitter thread. When a Canada-based user asked when the FSD beta would be rolled out in Canada, Musk tweeted the following:

We will start rolling out FSD beta in Canada cautiously in next 2 to 4 weeks

— Elon Musk (@elonmusk) January 16, 2022

It’s easy to question how serious Musk is. After all, he’s promised the FSD rollout in Canada already and it hasn’t happened. The fact that he laid out a specific timeline in this tweet, though, indicates that this time may be different.

This comes at a time when Tesla stock could certainly use a boost. Shares began to decline this morning and closed down 3.3%. Declines for the week come in at 10%. It’s safe to say that Tesla’s 2022 isn’t off to a great start.

Why It Matters

Much of the decline that Tesla stock has experienced so far can be chalked up to negative market momentum. That doesn’t change the fact, though, that the company needs a catalyst to help it regain momentum. Some concrete progress on the self-driving front could be exactly what it needs.

If the Canada rollout does indeed happen, it would be opportune for more than one reason. Tesla has recently received some negative press following an update that a driver in a 2019 crash will face felony charges. Why does this matter? Tesla’s Autopilot mode was in use at the time.

While the driver has been charged for the crime, instances like this don’t do much to inspire confidence in hands-off automotive technology. It could have been an isolated incident, but both the automotive and financial communities would like feel better if they saw some reassuring progress from the company associated with this sad story.

Canada’s EV market may not be as large as that of the U.S., but it is growing. The company saw 2021 sales of the Tesla Model Y increase by 137% year over year. Tesla’s Model 3 and Model Y were among the country’s best-selling EVs. What better way to get more consumers interested in buying your cars than by introducing a beta test close to home that promises to revolutionize driving?

If Musk does succeed in rolling out the FSD beta in Canada within the coming weeks, it will generate the type of momentum that will send Tesla stock shooting up. In the months following, the boost in sales will help it stay elevated.

What It Means for Tesla

As is often the case, Musk is unpredictable. EV aficionados have been disappointed by his lofty promises before. Every time Tesla has missed a deadline, though, it has come back just as strong. Recent drone footage suggests that the company is making progress on the Model Y at Giga Austin, though it hasn’t been confirmed.

Rolling out the FSD beta in Canada would be a strategic move, exactly the type Musk loves. This development is worth watching, regardless of when the rollout happens. When it does, Tesla stock will react well.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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NKLA Stock Just Hit a New Low, But Nikola Has Plans to Turn Things Around

Despite several signs of life this year, electric truck company Nikola (NASDAQ:NKLA) is still suffering consequences from last year’s bitter controversy….

Despite several signs of life this year, electric truck company Nikola (NASDAQ:NKLA) is still suffering consequences from last year’s bitter controversy. NKLA stock saw its share value reach an all-time low today after dropping more than 5% yesterday. It appears investors are still hesitant over the troubled EV company despite encouraging recent deals.

Image of NKLA logo on phone screenSource: Stephanie L Sanchez / Shutterstock.com

So, what’s going on with Nikola today?

It’s difficult to pinpoint the exact reasoning behind NKLA’s drop. One obvious contender is simply investor sentiment. Last year, Nikola came under fire after allegations that it had made several fictitious claims regarding its technological capabilities. Its founder and then Chief Executive Trevor Milton was arrested, and Nikola recently agreed to pay $125 million in fraud charges. It’s a major mark against Nikola and clearly not something a company can simply walk away from unscathed.

Regardless, Nikola has largely persevered. Nikola has made a number of promising deals to start the new year, including letters of intent from several companies interested in buying or leasing its emission-less trucks. Despite this, Nikola’s share price has failed to hold up its end of the bargain. The company is down nearly 6% today, trending around $8.71 at the time of writing, for a more than 37% decline in the past six months.

What other forces are at play for Nikola?

Investors Remain Speculative of NKLA Stock

Nikola is also likely a victim of impending market conditions against the innovative EV company. Treasury yields saw a sizable jump yesterday, projecting concerns related to impending interest rate hikes. This is a sell-sign for many technology and growth stocks, as it functionally means their future earnings will be discounted. EV startup Nikola is a perfect victim of this latest market indicator.

And it’s truly a shame. Nikola’s hot streak of deals continued just yesterday when the company announced a multi-year deal with another EV company, Proterra (NASDAQ:PTRA). Proterra agreed to supply batteries for Nikola’s semi-trucks, with estimates of prototypes to be delivered starting in Q2 of this year. By all counts, this is good news for the company and reflective of its vigor this year.

But alas, investors are demonstrably dismissive of the news. All eyes will be on Nikola ahead of its February quarterly earnings report to see if its comeback really is happening. But until then, it seems fans of the truck maker will have to hold on through the turbulence to see if there are clear skies ahead.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Nio Could Soon Be in Another Electric Tizzy

Electric vehicle (EV) companies are great long-term investments, but investors need to ensure that they manage their short-run value at risk because it…

Electric vehicle (EV) companies are great long-term investments, but investors need to ensure that they manage their short-run value at risk because it tends to be negatively skewed when volatility enters the fray. Nio (NYSE:NIO) performed especially well during the earlier stages of the pandemic for two reasons. First, NIO stock gained because unexpected expansionary monetary policy allowed for growth stocks to surge. Secondly, the market was craving a Tesla (NASDAQ:TSLA) competitor that could possibly emulate TSLA’s impressive bull run.

Source: xiaorui / Shutterstock.com

The broad-based market climate is set to change in 2022, however. With contractionary monetary policy entering the building, I expect many growth investors to scatter. NIO stock is one of the names that could be subject to such an event.

Here’s why.

NIO Stock: Deliveries Could Disappoint Many

According to Morgan Stanley analyst Tim Hsiao, Nio’s deliveries are set to get off to a slow start in January amid Chinese New Year celebrations and tight Covid-19 restrictions. The analyst has the following to say:

“The industry is looking for a pre-holiday boost to rev up weekly sales until later in January, when store traffic/deliveries could fall substantially. This is especially the case given sporadic lock-downs amid resurgence of Covid cases in China. With easing chip shortage, we saw more resilient sales in ICEVs than EVs at the beginning of year, likely due to unleashing of pent-up demand from 2021.”

With this in mind, I believe there will be a cooldown in demand for the rest of 2022 as well. Of course, many investors may be tired of hearing about China’s revised debt policies and its crackdown on big tech. But it’s very relevant in relation to car sales — especially when it involves product switching from ICE vehicles to EVs.

When it comes down to it, the reduction of private-sector leverage and a smoothing in technological development will likely underscore previously estimated real GDP forecasts, potentially damaging Nio’s top-line earnings growth as a result. In turn, that could damage the price of NIO stock.

There’s a Pricing Problem Here

The price-sales (P/S) ratio is an excellent metric to use when valuing a growth company. Why? Because it’s less susceptible to volatility and not easily manipulated by a company’s management team. One would usually compare a stock’s price multiples to its five-year average to justify an overvalued or undervalued call. However, seeing as Nio only listed in 2018, we’ll need to look at a sector comparison and then discuss cyclicality.

Currently, Nio’s P/S ratio is trading at a 7.7 times premium to the industry. That isn’t good news. Rather, it tells us that the market has gotten ahead of itself, which may mean that NIO stock is set for downward mean reversion in the short term. And business cyclicality certainly doesn’t help the cause. As I mentioned before, we’re heading into a contractionary monetary cycle. That usually gives rise to value stocks while stunning growth stocks like NIO.

A final pricing problem to look at is the company’s price-book (P/B) ratio. Right now, Nio’s P/B ratio is also trading at a premium relative to industry peers. The P/B ratio is an important metric to consider with asset-heavy businesses and Nio’s isn’t only overvalued based on a peer analysis. It’s also considerably above the valuation threshold, yet again suggesting downward short-term mean reversion.

What’s Next for NIO Stock?

All things considered, Nio is a great company. However, it could be subject to macroeconomic headwinds going into 2022. Furthermore, NIO stock isn’t priced correctly, with the lingering effects of 2020’s market gunning still present.

NIO stock is trading below its 10-, 50-, 100- and 200-day moving averages, conveying a downward momentum pattern that would take a lot to reverse. I wouldn’t look at shorting the stock, however. Last year, China’s recent hard-line political shift was a catalyst to a significant drawdown. Rather, investors should look to manage risk by shedding some weight from their portfolios or divesting until the stock’s key drivers are back in check.

On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for equity research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa, and his articles are published on various reputable web pages such as Seeking Alpha, Benzinga, Gurufocus, and Yahoo Finance. Steve’s content for InvestorPlace includes stock recommendations, with occasional articles on crowdfunding, cryptocurrency, and ESG.

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