Commodity Watch: Minerals and Magnets

AHMAD AL-SATI
PORTFOLIO MANAGER

Ahmad is the President and portfolio manager for Gemcorp Capital Advisors LLC, based in New York. 

Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser. 

Magnets created our modern world. They can now tell us a lot about current trade.

In 1620, Francis Bacon, the father of empiricism, observed that Europe’s renaissance rested on three discoveries: printing, gunpowder and magnets. 

“For these three have changed the whole face and state of things throughout the world; the first in literature, the second in warfare, the third in navigation.”

Without magnets European sailors may have not explored the Americas or circumnavigated the globe. Magnets continue to play an integral part in everyday life. They are essential for industrialization (factories), energy transition (wind turbines), robotics (motion sensors and grips), medicine (imaging), transportation (combustion engines and electric vehicles) and defence (jet fighters). 

Today’s magnets are made not mined. To make them, iron ore, cobalt and nickel are combined with (you guessed it) rare earth elements (REE). Although REEs are common, they are useless unrefined. Instead, refined REEs are combined with metals to create alloys with the requisite magnetic properties. But, despite magnets’ importance, the entire supply chain is dominated by China, which mines, refines REEs and manufactures magnets (90% of the market). Japan and Germany produce magnets but rely on Chinese processed REEs. The US has one vertically integrated operation that produces <1% of North American demand. 

Magnets and REEs illustrate why supply chains matter. Without REEs there are no magnets and thus no re-industrialization, no energy transition, and no robotics. Commodities remain the connective tissue of our everyday lives – magnets are just one example. For investors that means at least four lessons and opportunities: 

1. Differentiated demand drivers: The demand for commodities is effectively decoupled from financial assets and market speculation. It is inextricably tied to human activity and economic growth. Investing in commodities means financing everyday needs from industrial production to food security. 
   
   
2. It is not just oil: As shown by REEs, a plethora of elements are involved across our economies- each with its separate supply chain. The breadth and scope of the asset class creates opportunities across geographies and trade routes.
   
   
3. Diversification abounds: Not only do commodities, as an asset class, sit apart from typical US financial assets, but each commodity has its own supply-demand dynamics, which is not necessarily correlated to other commodities (yet another layer of diversification). 
   
   
4. The entire supply chain is available: An opportunity exists to fund and finance the production, processing, and transportation of a variety of products and commodities.

Overlaying that is the increasing demand of 8 billion people. Re-industrialization, new production facilities, new trade routes (barriers) must be built (overcome) and financed. That is an opportunity for both builders and funders.

The following is an extract from a LinkedIn post by Ahmad Al-Sati from 20/04/2025.