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Neodymium investment and trade
Neodymium is a metallic element and a rare-earth metal. This raw material is traded as an alloy and used in a variety of items that we will cover in this article.
It is also very easy to trade in a multitude of ways, which this article will tell you more about later on. You can see the content list below, to skip ahead to the part of your interest, or just continue reading.
Whether trading and investing in neodymium is a wise decision, is dependent on your strategy, the investment amounts and a whole lot more that, which we will guide you through step-by-step.
The price of neodymium varies depending on a variety of factors such as the availability and demand for the metal. The graph on this page will show you historical context and the trend that this raw material has undergone.
What to know before trading in neodymium
It is important to have background information on the raw material of your choice, before you trade in them, because it gives traders important information about the market. This can include fundamental and technical analysis, supply and demand dynamics, geopolitical events, and market sentiment.
Knowing these details helps traders make better informed decisions, spot potential risks, and identify areas where they may be able to gain an advantage. Having this information can also help improve the trader’s positioning and timing when entering into a trade.
Supply and demand
When trading or investing in raw materials, such as neodymium, supply and demand is the fundamental mechanism used to determine stock prices. Stock prices rise when demand is greater than supply as investors are willing to pay more for the stock.
Alternatively, stock prices fall when supply is greater than demand as investors are not willing to pay as much for the stock. Typically, demand for stocks increases when the raw material’s underlying fundamentals are strong or when investors believe the stock price will appreciate in the future.
As a result, savvy stock traders are always aware of factors influencing demand and supply to make educated trading decisions.
Use of neodymium
Of course with raw materials, stocks are not the only ways that the prices are influenced. It is important to know what neodymium is used for, to understand where the supply and demand come from.
Neodymium is a type of rare-earth element mainly used in the production of high-strength permanent magnets. It has a wide range of applications, including loudspeakers, DVD players, microphones, servo motors for power tools, wind turbines, hard disk drivers, MRI scanners and more. It is also used in some fluorescent bulbs, lasers, cemented carbide tools, and X-ray machines.
In neodymium, we can see the applications have a proven past and long-term future in applications. Having a lot of applications on the industrial areas such as medical, lasers and wind turbines, combined with consumer products like loudspeakers, DVD players and microphones, make it a very versatile raw material, which is a positive investment trait.
Production of neodymium
The exact amount of neodymium produced in a given year depends on market demand, but approximately 12,000 metric tons of neodymium are produced annually.
This raw material is produced mainly in China, the United States, and India. Other countries that produce the metal include Russia, Japan, Canada, Kazakhstan, and Brazil.
As we can conclude from this information, neodymium is a highly sought after and produced raw material by the world’s largest trading players. This means that the trade for neodymium will most likely not come a standstill any time soon, which increases the likelyhood of it being a safer long-term investment.
Trading and investing in neodymium
As mentioned before, neodymium is traded in a multitude of ways. The most common way to trade neodymium is to purchase contracts on a commodities exchange such as the London Metal Exchange (LME).
If you are looking to trade in these contracts, you are looking at buying lots of 1 metric tonne. Investments at these exchanges are often larger and higher risk.
Physical neodymium product
There is also the option of investing in neodymium by trading physical neodymium. As mentioned, it is used in a lot of large equipments, but it can also be found in rods, wires and powder.
Large suppliers sell this raw material in this form as well, which can be done in a lot smaller amounts, resulting in less risky trades.
The last more common option to buy neodymium as a raw material itself, is a bit harder.
Neodymium can not be traded typically on organized commodity markets, besides the contracts mentioned earlier, so buying it directly from a mineral or chemical supplier would be the next link in the supply chain.
Many of these suppliers offer online shopping, so accessing neodymium is very easy. Neodymium oxide and neodymium metal are the two most common forms of the metal.
The right way of investing in neodymium
Investing in neodymium can potentially be profitable for an average trader, as neodymium is widely used and can be easily sourced.
Additionally, neodymium prices may be affected by supply and demand dynamics in various industries, which can potentially create opportunities for traders to capitalize on price fluctuations.
An average trader may invest in neodymium because its demand is projected to increase significantly due to its use in high-tech applications such as audio equipment, electric vehicles and smartphones.
Neodymium is also a rare earth metal, making it a scarce and valuable investment.
The amounts of investments can vary depending on the type of buying that is done.
Buying it straight as a raw material is more expensive than buying physical products like wire, but also yields a higher ROI.
The most secure and easy, but expensive way, is to buy contracts on a commodities market like the LME.
The average investor should see nedoymium as a long-term investment, due to its high potential in use and its scarcity in the global market.
Neodymium was first discovered in 1885 and has been used in various aspects of life since ancient times, but it was not until the late 1990s that demand for neodymium began to increase dramatically.
In the years leading up to 2000, the price of neodymium ranged from $3-5/kg.
In 2000, the price shot up to around $50/kg, largely due to increased demand from the manufacturing of compact fluorescent lamps (CFLs).
Over the next decade, the price of neodymium fluctuated between $12 and $50/kg but eventually settled mid-way. In 2014, the price began to rise again, with high points in 2018 due to increased demand from the electric vehicle and wind turbine industries.
As of 2021, the price of neodymium has stabilized a bit more.
In general, the wide range of industrial applications of neodymium has helped to drive its price higher in recent years. It is also a safe haven for investors in times of economic instability, as its price is not as vulnerable to fluctuations in the stock market.
Is neodymium a good investment for trading?
Neodymium is an interesting investment for trading, because it is not a liquid asset that can be easily bought and sold. Its price can be very volatile, and it is not used in trading instruments such as options, futures or other derivatives.
Though scarce, the raw material is used in various industrial and commercial applications, making it a wanted material. This means that the increase in production of these applications, means an increase in price for neodymium.
A long-term strategy for neodymium is usually the safest bet, considering historical price fluctuations. But traders who are experienced in trading rare-earth metals like neodymium and palladium, might profit from high volatility in short timelines.