The latest monthly update of the DNB Renewable Energy fund has highlighted the contribution on a year to date basis of rare earth metals supplier Lynas Corporation, which being based in Australia and Malaysia stands to benefit from any Chinese implementation to limit its own exports of the elements in response to further US tariffs on imports of Chinese goods.
On a YTD basis to the end of May, Lynas stock was the biggest contributor to absolute performance of the fund, some 234 bps (albeit offset by negative bps performance of other holdings).
In a note the manager stated: "Malaysia licensing seems to be sorted and rare earth potentially becoming part of trade war."
Lynas' refining takes place in Malaysia, whence the oxides mined in Western Australia are shipped. There have been regulatory challenges to this refining, linked to concerns around radioactive waste - rare earth metals tend to sit side by side with naturally occurring radioactive substances in the ground. An early December 2018 review published by the Malaysian government concluded that the operations were "low risk and compliant with applicable laws", according to Lynas' report on the review.
Lynas constitutes 3.59% of the Renewable Energy fund holdings.
Overall, the month saw considerable pressure on asset values, but portfolio mangers Jon Sigurdsen and Christian Rom noted that this had presented them with buying opportunities.