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Fort Metlock - A Rare Place For Rare Earths

Friday August 16, 2013 11:54

Editor's Note: The demand for new gadgets like smartphones, tablet computers and even electric cars is generating a lot of interest in the tech metals industry. This relatively new group of metals and minerals is a combination of precious metals and rare earth elements. Kitco News sees the need for reliable information about this growing commodities sector. For this reason Kitco has partnered up with Bodo Albrecht an independent analyst with 20 years of experience in the precious metals industry. Stay tuned for this weekly new feature on kitco.com! Tech Metals Insider - one more reason to come to world's premier gold site.

A remnant of World War II, bunkers – civilian and military – are still present in some parts of Central Europe. People tried to tear them down, detonate them or destroy them otherwise without much success. So they learned to accept them as indestructible monoliths where they occur.

One such bunker, once designed to provide shelter to the citizens of Frankfurt am Main, Germany, has now found a new calling: it was turned into one of the most secure buildings in Germany, designed to store technology metals, precious metals and rare earths. The name: Fort Metlock.

Steel-reinforced concrete walls 2m (6.5ft) thick including ceiling and foundation surround 1,400sqare meters (15,000 square foot) of secure space on three levels. The space is divided into individual units ranging from a standard lockbox to entire shelves. A large freight elevator is used to move the goods where they belong. A 4.6t armored door makes sure no one gets in without a key. On the inside, the cool of marble floors, bright lighting and polished lockboxes awaits the lucky few who are invited in. The facility enjoys “duty free” status so the steep German 19% VAT is not applicable on materials warehoused within.

The owner: Matthis Rueth, President of Tradium GmbH, one of Europe’s largest traders of technology metals and rare earths. He spotted the need for a facility like this while working with industrial users of these materials and related individuals who expressed a desire to own physical inventories as strategic investments.

“Technology metals are not for inexperienced investors” warns Rueth and points out that those who invest often do so with a horizon of five or more years in mind. Plus, they typically do not invest exclusively in such metals but use them to enhance or replace their gold portfolios.

Rueth explains that of the 17 rare earth metals only 9 are suitable for investors (primarily erbium, dyoprosium, terbium and neodynium). Of the specialty metals, investor focus is on gallium, indium and germanium. The market is just emerging from dramatic price drops that occurred two years ago. They were caused by previous spikes in price in anticipation of higher demand, to which producers responded with higher outputs. “I feel good about recommending gallium as an investment”, explains Rueth, “because the price has just bottomed out. It may go sideways for quite a while but it is unlikely to fall”.

Demand, on the other hand, is sure to rise. Both rare earths and specialty metals play a key role in semiconductors, LED screens, LED lighting and permanent magnets used in electric motors. And since these metals are both unique in their technical properties and used in just minute amounts per unit, Rueth considers them largely safe from substitution: “Substitution will not change the cost of the end product much, regardless of the raw material cost”.
On the other hand, “In today’s world, even small cars have computer screens, navigation systems and soon night vision devices. And the desire to write an e-mail at a red traffic light is apparently increasing every day”, says Rueth with a wink.

The fact is that never before has the world see such a rapid innovation in technology, and it is obvious that this path is getting broader with more countries around the world participating. At the same time, resources of these rare commodities are finite, and they are controlled by only a few countries around the world with China holding access to over 80% of them.

The path is not only broadening, its direction is becoming quite clear to the metals industry, too.

By Bodo Albrecht
tminsider@eniqma.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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