15 July 2025
Dear Fintax Investor
Mercantilism, the historical economic doctrine of amassing national wealth through trade surpluses and resource control, is experiencing a revival as nations pivot away from globalisation toward strategic self-interest. In the 16th to 18th centuries, empires hoarded gold and controlled trade routes; today, the focus is on rare earth minerals (REMs)—17 elements like neodymium, dysprosium, and cerium critical for technologies powering electric vehicles, wind turbines, and military hardware. China’s grip on over 85% of global REM refining, despite holding only about 37% of known reserves, mirrors classic mercantilist monopolies, giving it leverage to influence global markets through export restrictions, as seen in its 2010 limits on Japan. The shift from globalisation’s open markets, accelerated by trade wars, supply chain disruptions, and geopolitical rivalries, has nations like the U.S. scrambling to secure domestic REM supplies, signaling a new era of resource nationalism that captivates investors and reshapes global economics.
Source: US Geological Survey (USGS). Note: Typically, countries with high REM reserves have low production capacity (ex. South Africa & Greenland).
The investment landscape is buzzing with opportunities and risks as demand for REMs is projected to triple by 2040, driven by the clean energy transition and defense needs. Investors are pouring capital into non-Chinese REM ventures, such as MP Materials in the U.S. or Australia’s Lynas Corporation, though these face environmental and cost challenges due to the polluting, capital-intensive nature of REM extraction. Simultaneously, investors are betting on private companies and unproven start-ups. Companies like Noveon Magnetics, focused on recycling neodymium magnets, and research into REM-free alternatives, like Honda’s hybrid engine or graphene-based technologies, are also drawing attention as hedges against supply risks. This neo-mercantilist saga is a high-stakes drama where nations play chess with critical resources, and investors bet on miners, recyclers, or disruptors in a volatile market shaped by the retreat from global cooperation toward strategic self-reliance.
The looming REM shortfall underscores the value of investing in highly innovative companies with a proven track record of developing cutting-edge solutions to bypass resource constraints. Companies like Tesla and Apple, known for their relentless innovation, are already exploring REM-free technologies—such as Tesla’s iron-based batteries or Apple’s recycling initiatives to recover rare earths from devices. By focusing on firms with historically strong R&D capabilities, investors can capitalise on the potential for breakthroughs that reduce or eliminate REM dependency, offering a hedge against supply chain disruptions and price volatility. This strategy not only mitigates risks tied to China’s refining dominance but also aligns with the growing demand for sustainable, resource-efficient technologies, making it a compelling approach in a neo-mercantilist world where adaptability is key. Both Fintax Funds hold positions in such companies, including Samsung Electronics, SK Hynix, Tesla, Apple, TSMC, Broadcom and others.