When it comes to commodities, individual countries often dominate global reserves. While the United States may be the world’s largest oil producer, Venezuela holds the world’s largest proven oil reserves with over 300 billion barrels. Australia and Russia have the largest unmined gold deposits, and Brazil is the largest producer of soybeans.
For rare earth elements, or REEs, China dominates the market with an estimated 44 million metric tons. That accounts for approximately 40% to 49% of known global reserves. The country also leads in global production, mining just under 70% of the world’s supply and refining nearly 90% of it.
REEs are critical to energy, aerospace and defense systems, artificial intelligence and data centers, semiconductors, robotics, EVs, and a slew of other industries. In turn, China’s degree of influence over the market led President Donald Trump to invoke the Defense Production Act in March after the administration labeled REEs a national security priority.
But for investors looking to circumvent Trump’s ongoing trade war with China and any potential fallout from ongoing geopolitical unrest, a new exchange-traded fund (ETF) offers pure-play exposure while cutting out Chinese companies. In doing so, the fund can add a layer of security in the event that the Asian country once again enacts REE export controls.
Global Demand for REEs Continues to Grow
REEs include 17 metallic elements that are critical to the production of tech applications, lasers, and magnets. Despite their name, they aren’t rare in abundance. Rather, they are rare in concentrated, easily extractable deposits that can be economically mined from the Earth’s crust.
According to Grand View Research, the global REE market size was estimated at $3.95 billion in 2024. But it is projected to reach $6.28 billion by 2030, good for a compound annual growth rate (CAGR) of 8.6% during the forecast period.
While the Asia Pacific region commands 86% revenue share, Grand View projects the U.S. REE market to outpace global growth while undergoing a CAGR of 9.2% between 2025 and 2030. That is critically important in light of China’s past export controls.
On April 4, 2025, the country instituted major restrictions on the export of seven REEs. It followed with a second wave of restrictions on Oct. 9, 2025; some of those October measures were later reported by Xinhua as suspended through Nov. 10, 2026.
Currently, there are no expectations for China to lift those controls before the end of the decade as they are part of a tactical strategy that includes case-by-case authorizations acting as levers for geopolitical tensions.
That presents an opportunity for shareholders of the recently debuted Sprott Rare Earths Ex-China ETF (NASDAQ: REXC).
The ETF Providing a Rare Opportunity for Rare Earths
The REXC’s portfolio focuses on REE producers, development-stage miners, processors, and specialty materials companies operating in jurisdictions other than China.
By focusing on an ex-China angle, the fund aims to provide a thematic alternative for investors seeking diversified REE supply chain exposure while moving away from the risks of China’s dominant role in the market.
According to Sprott, the fund’s issuer, “the [REXC] invests exclusively in companies outside of China that may have significant growth potential as supply chain security becomes a national priority.”
That targeted exposure to companies involved in the supply chain outside of China still provides investors with access to the Asia Pacific region’s REE dominance, but also to the United States’ higher projected CAGR.
Companies based in Australia account for nearly 52% of the fund’s holdings. That is notable as Australia has substantial REE reserves that amount to the fourth-largest stockpile on Earth, with 5.7 million metric tons. The REXC’s second largest holding by weight at over 17% is Australia-based Lynas Rare Earths Limited (OTCMKTS: LYSCF)—a Buy-rated stock that analysts see as having nearly 60% upside over the next 12 months based on its consensus price target.
Another 36% of the portfolio consists of companies based in the United States, including Las Vegas-headquartered MP Materials (NYSE: MP)—the ETF’s largest holding by weight and market value. Accounting for around 20% of the fund’s portfolio, MP is also a Buy-rated stock that analysts see as having nearly 22% upside over the next 12 months based on its consensus price target.
Companies based in Canada and the United Kingdom account for another 14.7% of the fund’s holdings.
The REXC’s Targeted Exposure Comes With Caveats
While the fund could benefit from the same headline risks that loom as a threat to Chinese REE stocks, investors should be mindful of some issues with the REXC. Foremost, the fund is passively managed but carries a comparatively high expense ratio of 0.65%.
Additionally, prospective investors should consider the fund’s thematic concentration risk and be conscientious of REE overexposure. Lastly, commodity prices—broadly—can be inherently volatile as they are subject to project timeline delays and regulatory factors.
Lastly, liquidity can be light. As a newly debuted ETF, average daily trading volume is less than 222,000 shares. But for investors who see the appreciation potential of a strate
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The article "Investing in Rare Earth Elements: How the REXC ETF Bypasses China’s Dominance" first appeared on MarketBeat.
