Rare-earth minerals, with names like cerium, dysprosium and gadolinium have become "must have" materials in the global race to win the technology battles of the future. The problem is that throughout the last 30 years China has built a near monopoly in these strategic metals.

 

Rare-earth elements (REEs), consisting of 17 different minerals, are used to make components in many high-technology devices, including smart phones, digital cameras, computer hard discs, fluorescent and light-emitting-diode (LED) lights, flatscreen televisions, computer monitors, and electronic displays. China commands 35 percent of the world's reserves of these minerals and produces more than 70 percent of all rare earth tonnage worldwide.

 

In our present trade wars with China, the possibility that China might respond to U.S. tariffs by embargoing our REE imports is a real threat, since last year China accounted for 80 percent of our total rare-earth compounds and metal imports.

 

After years of delay before recognizing this danger, President Trump signed an executive order aimed at expanding domestic production of REEs last week. He ordered the Interior Department to explore using the Defense Production Act to speed up the development of such mines. Trump used the same law to accelerate the production of medical supplies to help combat the coronavirus pandemic this year.

 

The hope is that the energy secretary can identify projects here in the U.S. that could help the country increase our own production and holdings of these minerals. Sadly, we have a long, long way to go before we catch up to China. Today, the U.S. has only one rare-earth mine, which is located at Mountain Pass, Calif. It is owned by a private company, MP Materials, which is 10 percent owned by a Chinese company, Shenghe Resources Holding Co. All of MP's materials are exported back to China.

 

Rare-earth isn't the only strategic metal that the U.S. needs, however. Lithium is another metal in great demand and is used to manufacture electric car batteries. Global lithium production is about 400,000 tons annually. That is enough to power 2-3 million electric vehicles (EVs), but only about one third of that production actually goes into EVs. The rest, like REEs, is used in computers, cellphones and rechargeable devices. If companies such as Tesla plan to increase production of EVs in the future, then the supply of lithium must increase dramatically. Once again, it is China that controls about 40 percent of world lithium production. The rest is divided among Australia and Chile. The "Big Three" producers — Albemarle, Sociedad Quimica y Minera de Chile, and FMC — hold practically an oligopoly in the lithium market.

 

In another U.S. initiative, our Department of Commerce has taken steps to protect America's uranium industry from foreign dumping. Both Russia and the U.S. have initialed a draft amendment to reduce U.S. reliance on uranium from Russia over the next 20 years. Russia has been dumping cheap uranium into U.S. markets for years, driving American miners and processors out of business. This practice leaves our country exposed to the same dangers we now face with other strategic metals. 

 

While all of the above actions are necessary, in my opinion, it will be years before the U.S. can gain a competitive advantage in any of these resource areas. Doing so is just as important as domestic recognition back in the 1972 that we needed energy independence in order to remain the nation we are. 

 

As October begins, mountains of candy have become a fixture in every store and supermarket. Halloween is the first in a series of fall into winter holidays. The candy companies are hoping it's going to be business as usual this year, but that depends on who comes to your door. 

 

Whether it is trick-or-treating or costume parties, no one wants a visit from this year's most fearsome of monsters—the coronavirus. Worried parents wonder if this unwanted guest will be hiding among those candy wrappers, or in the noses, hands and mouths of excited children (or the parents and guardians accompanying them). Will one cough undo months of masks and safe spacing?

 

The Centers for Disease Control has already issued medical guidelines that label all the traditional Halloween behavior patterns as "high risk" activities.     

 

That means no door-to-door activities, indoor parties, hayrides, visits to haunted houses, or rural fall festivals. The CDC gives alternative suggestions, which center on an immediate family night with a Halloween theme, such as carving pumpkins, or virtual costume parties with your children and their friends. 

 

"But it just won't be the same," lamented one mother to me.

 

While that may be true, it doesn't seem to have deterred consumers from stocking up on candy. U.S. sales of Halloween candy are up 13 percent from this time last year, according to the National Confectioners Association. Chocolate candy is up 25 percent. Usually, we would expect to see a single-digit increase at best.

 

That is a hopeful development for candy companies that depend on the 10-week period surrounding Halloween for as much as 14 percent of yearly revenues. Halloween is the biggest holiday of the year in this $36 billion industry, followed by Christmas and Easter, with Valentine's Day trailing in fourth place. Overall, however, the National Retail Federation expects consumer Halloween spending to decrease about 8 percent, even if those who do decide to celebrate are expected to spend 6 percent more on average. 

 

Is this increased candy consumption in September a sign that consumers are planning to disregard the CDC's warnings? And, if so, would that potentially create a nationwide, coronavirus superspreader event? Not necessarily.

 

Brach's, the maker of Candy Corn, thinks it could be because the candy-selling season started three months earlier this year. Consumers, with many activities curtailed and with more money in their pockets as a result, may be splurging on candy, which is far cheaper than going out to a restaurant, and simply using Halloween as an excuse to indulge. The real test will be in the last two weeks of October when companies such as Mars Wrigley's usually chalk up as much as 55 percent of their total Halloween candy sales.

 

A market research company, Numerator, which surveyed 2,000 consumers at the beginning of August, found that more than the respondents planned to buy less candy this year than normal. The uncertainty of the turnout for trick-or-treating due to COVID-19 evidently had some consumers planning for less of a celebration. 

 

In response to the uncertainty, candy companies have both reduced, as well as re-sized, their candy bags. Smaller bags that can be used for everyday consumption, but can still be sold after the holiday, is another way some companies are hedging their bets. Candy companies are also getting creative while working with the CDC guidelines to come up with interesting and unique ways that families can celebrate the holiday and still stay safe. Just peruse their websites for some alternative ideas, some of which are pretty imaginative. 

 

Communities across the nation are also coming up with good ideas. In my own town, Downtown Pittsfield Inc is holding a trick-or-trunk event, which involves the community coming together in a parking lot on Oct. 15, so that the children can safely trick-or-treat out of the decorated trunks of their cars. The candy is then quarantined for two weeks and available by Halloween.

 

In the end, it comes down to the kids, doesn't it? As we all know, children are having a tough time of it during this health crisis. They are out of school and away from their friends. Most of the day, they are glued to their computers, sometimes for hours at a time. There are no after-school activities, no sports, and even going outside has become a controlled activity. Most of this year has been a big downer. Are we also going to disappoint them on Halloween, or will we be able to find new and joyful ways of celebrating, despite the crisis we are suffering? I'm betting we will.

 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.