Marketing Communication

Rare Earths in the Spotlight as US and China Battle Over Supply

11 November 2025

Martijn Rozemuller

CEO – Europe

With the 17 metallic elements are at the center of geopolitical competition, the rare earth companies behind them may prove lasting beneficiaries

When the US and China agreed a one-year trade truce at the end of October, a group of 17 metallic elements known as rare earths were at the heart of their settlement. China agreed to postpone export controls¹ on these minerals that have become crucial for high-tech applications in electronics, green energy and defense.

Playing a characteristically long game, China has come to dominate the industry and commands more than 90% of production and processing. As long ago as 1987, then-Chinese leader Deng Xiaoping declared: “The Middle East has oil, China has rare earths”².

In the decades since, rare earths have become essential for the evolving global economy. They are key for a range of applications such as electric vehicles EVs, wind turbines, robotics, drones and fighter jets³. It’s fair to say that they are at the heart of economic and military competition between nations.

The US and other major nations are keenly aware of this. The US is introducing increasingly radical steps to kick-start the production of rare earths outside China, sparking a rally in the share price of rare earth mining companies, a trend that was also evident⁴ in the VanEck Rare Earth and Strategic Metals UCITS ETF.

What Are Rare Earths?

The name rare earth is a misnomer, as these lustrous silvery-white soft heavy metals are relatively abundant. But the 15 lanthanide elements, along with scandium and yttrium, are only found in compounds, rather than as pure metals, that are difficult to isolate and purify. Refining them is complex and environmentally sensitive.

While the US and Europe treated raw earths as an afterthought for many years, China’s low-cost processing industry quelled any competition. In recent years, that has become increasingly problematic for other countries as rare earths are essential for the growing electrification of the global economy associated with artificial intelligence and the energy transition.

Just as China has sought to weaponize rare earths for geopolitical means, so the US and others are urgently seeking to break the country’s stranglehold on supply. In 2025, China introduced new licensing rules on rare earth exports amid US controls on advanced semiconductor chips⁵. The October truce suspended these controls⁶ but not before the US, EU and others had begun introducing measures to stimulate supply from elsewhere.

The Investment Story

Global appetite for investment in rare earths has surged because these metals now sit at the intersection of national security, clean energy and industrial policy. Governments in the US, Europe, Japan and Australia are moving quickly to secure supply chains through direct financing, tax incentives and procurement guarantees. For instance, the US Department of Defense in July acquired a 15% stake in MP Materials, the largest US producer of rare earths⁷.

Investors see steadily growing demand for rare earths backed by government policy. They are an essential component of AI hardware and clean energy technologies such as grid storage, wind power, and electric vehicles (EVs), as well as advanced defense systems, including the F-35 fighter jet (see graphs below).

Demand for Magnet Rare Earth Elements (kt)

Announced Pledges Scenario

Data. (2025). Critical Minerals Dataset - Data product - IEA.

Source: Venditti, B. (2025, July 20). Visualizing how rare earths power U.S. defense. Visual Capitalist.

Diversifying Against Risk

But investing in rare earth miners and other companies in the supply chain remains subject to a range of risks, whether from geopolitics, trade disruptions, renewed export restrictions or political instability in key producing countries. What’s more, there is project execution risk, as some companies in the sector may depend on unproven technologies, complex permitting processes and sustained government support.

For that reason, diversification across companies is key. Our VanEck Rare Earth and Strategic Metals UCITS ETF has 20+ holdings spread across nine countries. Rare earth elements, comprising 17 metallic elements, have become a focal point of geopolitical and economic attention as countries seek to strengthen their strategic positions. Even without government intervention, these materials remain fundamental building blocks for much of today’s technology and will continue to be essential to the innovations of the future.

¹ Jackson, L. (2025, October 30). US gets rare earth reprieve from China, but not rollback. Reuters from https://www.reuters.com/sustainability/climate-energy/china-agrees-one-year-rare-earth-export-deal-issue-settled-says-trump-2025-10-30/

² Financial Times. (2023, September 19). Can Europe go green without China’s rare earths? Retrieved from https://ig.ft.com/rare-earths/

³ SFA (Oxford). Critical minerals and magnets 2025, from https://www.sfa-oxford.com/knowledge-and-insights/critical-minerals-in-low-carbon-and-future-technologies/critical-minerals-in-magnets/

⁴ VanEck. VanEck Rare Earth and Strategic Metals UCITS ETF – Performance. Retrieved from https://www.vaneck.com/ucits/investments/rare-earth-etf/performance/

⁵ Baskaran, G. 2025,China’s new rare earth and magnet restrictions threaten U.S. defense supply chains. Centre for Strategic & International Studies. https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

⁶ CNBC. (2025, October 30). Rare-earths stocks: China delays export controls after Trump-Xi summit. https://www.cnbc.com/2025/10/30/rare-earths-stocks-china-delays-export-controls-after-trump-xi-summit.html

⁷ MP Materials Corp. (2025, July 10). MP Materials announces transformational public-private partnership with the Department of Defense to accelerate U.S. rare earth magnet independence. Retrieved from https://mpmaterials.com/news/mp-materials-announces-transformational-public-private-partnership-with-the-department-of-defense-to-accelerate-u-s-rare-earth-magnet-independence/

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