In recent years, Rare Earth Elements (REE) have emerged as a hot topic in international politics and the investment industry. Even former US President Donald Trump has highlighted the strategic importance of these critical resources. This post covers everything about Rare Earths.
Table of Contents
- Overview of Rare Earths and Market Dynamics
- The Role of Rare Earths in the US-China Conflict and Ukraine War
- Global Supply Chain and Key Producers
- Leading Companies and Investment Strategies (Including ETFs)
- Price Trends of Rare Earths Over the Past 5 Years (with Charts)
- Main Application Areas of Rare Earths (Electric Vehicles, Semiconductors, Defense, etc.)
Overview of Rare Earths and Market Dynamics
Rare Earths refer to 17 chemical elements, including scandium, yttrium, and the lanthanides from lanthanum to lutetium. Contrary to their name, these elements are not necessarily found in extremely low concentrations in the earth’s crust. The challenge lies in that they are rarely extracted in a pure form, as they are typically bound with other minerals, making separation and refining a complex and costly process. Hence, they are often called “rare earths,” even though they are available in useful quantities.
From a market perspective, Rare Earths are used in smartphones, electric vehicles, wind turbines, and military equipment, making them indispensable materials in modern industries. With the global energy transition and the increasing adoption of electric vehicles, the demand for these metals is expected to surge by 400–600% in the coming decades, as they are extensively used in wind turbines, solar panels, and EV batteries. Governments around the world have designated Rare Earths, along with nickel and lithium, as “strategic key resources” and are actively working to secure their supply chains.
Historically, the prices for Rare Earths have been relatively stable; however, in recent years, imbalances in supply and demand, as well as geopolitical risks, have led to significant price fluctuations. At the beginning of 2020, the COVID-19 pandemic and supply chain disruptions caused prices to rise, so that in early 2022, the prices of some Rare Earth oxides surged by over 300% in just two years. Prices later dropped due to economic slowdown and increased supply, but long-term forecasts predict a resurgence driven by the growing demand in the electric vehicle and renewable energy sectors.
The Role of Rare Earths in the US-China Conflict and Ukraine War
Amid rapidly changing international dynamics, Rare Earths have emerged as a key factor in economic security. In the conflict between the USA and China, these metals – along with semiconductors – are at the center of strategic power struggles. China practically controls the global production and processing of Rare Earths, giving it the leverage to use them as a strategic tool against the USA and the West. For example, during a conflict with Japan in 2010, China halted Rare Earth exports, and similar concerns have arisen during the US-China trade war. At the end of 2023, China announced a complete export ban on technologies for refining Rare Earths, further heightening tensions in the West.
The USA has responded accordingly. Even during the Trump administration, the strategic importance of these metals was emphasized, and the USA invested in building an in-country supply chain through the Defense Production Act (DPA). Under the Biden administration, import tariffs on Chinese electric vehicles and strategic minerals were introduced in 2024, and from 2026, a 25% tariff will be imposed on Chinese neodymium magnets, which are critical components of electric vehicle motors. Additionally, the European Union adopted the Core Raw Materials Act (CRMA) in 2023 to increase the share of strategic minerals produced domestically.
Global Supply Chain and Key Producers
Currently, the global supply chain for Rare Earths is heavily dependent on China. In the past, China produced up to 97% of the world’s Rare Earths, and today its share is around 60–70%. Furthermore, China handles 80–90% of the process of converting raw ore into high-purity oxides, meaning that it practically controls the entire supply chain. In the Baotou region of Inner Mongolia, large state-owned enterprises are concentrated, and the Chinese government strictly regulates the sector through production quotas and export restrictions.
Outside China, production is still limited but gradually increasing. The USA, which once led through the Mountain Pass mine in California, experienced a decline in production in the early 2000s due to competitiveness issues, but has recently resumed operations. In 2023, the American production of Rare Earths reached about 43,000 tonnes, representing roughly 15% of global production; however, due to a lack of domestic refining facilities, most of the ore is exported to China for further processing. Australia is considered one of the top three countries with reserves of approximately 22 million tonnes, and Lynas Rare Earths produces about 17,000 tonnes of Rare Earth Oxides annually from the Mt. Weld mine in Western Australia, while also operating a refining facility in Malaysia. In Myanmar, the extraction of Rare Earths has increased significantly in recent years, from about 12,000 tonnes in 2022 to 38,000 tonnes in 2023, with China apparently being the main buyer. Thailand, India, Russia, and Vietnam also contribute on a smaller scale.
Regarding reserves, it is estimated that China holds around 44 million tonnes, followed by Brazil (21 million tonnes), Vietnam (22 million tonnes), Russia (10 million tonnes), and India (6.9 million tonnes). Confirmed reserves in the USA exceed 1.8 million tonnes, though developing economically viable, high-concentration ores remains a challenge. New projects in the USA, Australia, and Canada are underway, supported by increased government funding. Both the US Department of Defense and the Department of Energy are investing billions in extraction and refining projects, while the EU has initiated efforts in France to establish domestic facilities.
In summary, the global supply chain for Rare Earths is transitioning from a Chinese monopoly to a diversification outside China. Although China remains the dominant supplier, the USA and its allies are expanding investments in integrated supply chains—from extraction through refining to magnet production—to reduce their dependency. This restructuring, combined with geopolitical tensions, is expected to significantly impact market structure, so investors should closely monitor global supply chain changes.
Leading Companies and Investment Strategies (Including ETFs)
The Rare Earth sector is relatively small and has high entry barriers, which means that only a limited number of companies are relevant. In China, many companies operate as state-owned or semi-state-owned enterprises, making it difficult for foreign investors to access them. Therefore, companies outside China that produce or process Rare Earths are attracting global investment attention.
- Lynas Rare Earths – An Australian mining company and the largest supplier of Rare Earths outside of China. The company extracts ore from the Mt. Weld mine in Australia and refines it in a facility in Malaysia to produce, among other products, neodymium-praseodymium oxides (NdPr). With an annual production capacity exceeding 16,000 tonnes, it is currently building an in-country refining facility in Texas, USA, supported by $280 million from the US Department of Defense. When operational, this will be the only domestic Rare Earth refining plant in the USA.
- MP Materials – A US company operating the Mountain Pass mine in California, regarded as one of the largest producers of Rare Earths outside China. The company went public in 2020 and has a market value of approximately $3 billion. Currently, the concentrate from the mine is exported to China for refining, but since 2023 the company has begun producing some NdPr oxides in-house. Additionally, a facility for producing neodymium magnets is being built in the USA, with plans to produce finished magnets for automakers like GM by the end of 2025. MP Materials is pursuing vertical integration—from extraction to oxide production and magnet manufacturing—and receives support of $58.5 million from the US government.
- Energy Fuels – Originally a US uranium mining company, it has now shifted to refining Rare Earths at its White Mesa facility in Utah. Since 2023, the company has started commercial production of NdPr oxides, targeting an annual production of 1,000 tonnes. Energy Fuels does not own its own mine but imports raw materials for refining.
- Neo Performance Materials – A Canadian company with a global presence that operates the only commercial Rare Earth refining facility in Europe, located in Estonia. The company imports ore from China and other regions to conduct both refining and magnet production and is regarded as a leading player in high-tech magnets in the West.
Other companies, such as CBMM (Brazil), Rainbow Rare Earths (South Africa), and NioCorp (USA, in the development phase) are also active, but so far Lynas and MP Materials dominate the market in terms of production volume and performance. There is even speculation about a possible merger between MP Materials and Lynas, which may indicate an impending industry restructuring.
In terms of investment strategies, there are two main approaches. The first is direct investment in the stocks of individual companies active along the entire value chain—from extraction to magnet production. However, due to high volatility and significant political influences, caution is required; the stock prices of Lynas and MP Materials have reacted sensitively to price fluctuations and political decisions. Direct investment carries high risk along with the potential for high returns, so it is important to carefully assess each company’s financial condition, technological capabilities, and whether they receive government support before investing.
The second approach is to invest in ETFs that focus on Rare Earths and strategic metals – for example, the VanEck Rare Earth/Strategic Metals ETF (Ticker: REMX). This ETF tracks an index comprised of global companies involved in the extraction and refining of Rare Earths, and also includes companies from the battery metals sector (e.g., lithium and cobalt). ETF investment offers broad diversification but is highly dependent on fluctuations in raw material prices.
In summary, investing in Rare Earths is typically done either through specialized companies or indirectly via ETFs. A thorough understanding of the political framework and price volatility is essential. Although companies outside China are growing thanks to support from the USA and its allies, the market remains relatively small and volatile, making it prudent to strategically include Rare Earths as part of a diversified portfolio.
Price Trends of Rare Earths Over the Past 5 Years (with Diagram)
The diagram below is based on data from the International Energy Agency (IEA) (see IEA report) and shows how the Rare Earth price index, set to 100 in January 2020, rose sharply until the beginning of 2022 before plummeting.
Main Application Areas of Rare Earths (Electric Vehicles, Semiconductors, Defense, etc.)
Rare Earths are often referred to as the “vitamins of industry” because they are indispensable in a wide range of high-tech applications. The key application areas include:
1. Electric Vehicles (EV) and Renewable Energy
- Permanent Magnets: Elements such as neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb) are essential raw materials for producing NdFeB magnets, which are used in EV motors and wind turbines. These magnets deliver exceptional magnetic strength relative to their size, thereby enhancing EV motor efficiency and maximizing wind turbine performance. For example, neodymium magnets are used in the Tesla Model 3, and large wind turbines require several hundred kilograms of these magnets.
2. Consumer Electronics (Smartphones, Computers, etc.)
- Smartphones and Devices: Modern smartphones contain approximately 8 to 12 different Rare Earth elements. Neodymium magnets are used in speakers and vibration motors to ensure high sound quality and vibration functionality, while dysprosium enhances the thermal stability of these magnets. Additionally, Rare Earths are used in the drive motors of laptops, hard disk drives, headphones, and in phosphors for TVs and monitors to produce vivid colors.
3. Semiconductors and IT Technology
- Polishing Agents: Cerium oxide is used as a polishing agent for silicon wafers to achieve smooth circuit patterns in semiconductor chips. Furthermore, certain Rare Earths are used for specialized doping in semiconductor circuits. High-performance lasers, such as YAG lasers, use synthetic crystals with added neodymium to enable precise microfabrication processes. Additionally, gadolinium is being researched for the development of MRAM (magnetoresistive random-access memory).
4. Defense and Aerospace
- Military Applications: Rare Earths are indispensable in modern weapons systems. Neodymium magnets are used in missile guidance systems and military communications, while europium is employed in night vision equipment and other electronic systems. For example, an F-35 stealth fighter contains over 400 kg of Rare Earths, underscoring their importance in the development of modern defense technology. As modern defense systems become more advanced, each soldier could end up carrying several kilograms of Rare Earths in their gear, making them crucial for national security.
5. Other Industrial Applications
- Catalysts and Lighting: Rare Earths such as cerium and lanthanum are used in petrochemical catalysts and automotive catalytic converters. Although their usage has decreased with the shift towards cleaner energy, they remain indispensable in many industrial processes. Europium and terbium are also used as phosphors in TVs and smartphones to create clear, vibrant colors.
- Medical Imaging: Gadolinium is used as a contrast agent in magnetic resonance imaging (MRI) and X-ray examinations to significantly improve image quality.
Internal Links (Example)
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Summary
This guide provides a comprehensive 360-degree analysis of Rare Earths in the context of current geopolitical tensions, with a special focus on the conflict between the USA and China. It examines market dynamics, the global supply chain, leading companies and investment strategies, price trends over the past 5 years, and the key application areas in electric vehicles, consumer electronics, semiconductors, defense, and more.
In light of the current political and economic uncertainties and the growing market opportunities, this guide will remain a valuable and enduring resource for both investors and industry experts.
Recommended Sources:
– Report on the global supply chain for Rare Earths
– Comparison of ETFs in the Rare Earth sector
– Outlook on the raw material market in the electric vehicle sector
Conclusion:
Rare Earths lie at the intersection of technological dominance and the energy transition, playing a crucial role in both economic strategies and national security. This guide, available in 11 languages, is designed to provide the in-depth knowledge and strategies necessary to make informed investment decisions in this dynamic sector. Keep a close eye on the rapid market changes and use this information to optimize your investment strategy.
We wish you great success with your investments. Please read the guide carefully.
Here are three external links related to 2025 Trump Also Pays Attention to Rare Earths: A Comprehensive Guide to Investment Strategies Amid the US-China Conflict and Ukraine War:
- Trump’s Policy on Rare Earth Elements and National Security: An analysis of how Trump’s policies on rare earths could impact the global market amid tensions with China and its implications on national security.
- US-China Trade War and Its Impact on Rare Earths: A comprehensive overview of how the US-China trade conflict is affecting the supply of rare earth elements and investment strategies.
- Rare Earths: Strategic Resources in the Context of the Ukraine War: Insights on the strategic importance of rare earth metals in the current geopolitical landscape, particularly in relation to the Ukraine conflict and global supply chains.
These links provide context to the ongoing geopolitical tensions and investment strategies tied to rare earths, especially considering the US-China conflict and the Ukraine war.