Rare earth elements are critical components in many high-tech and green energy applications. As demand for these materials surges, investors are increasingly looking for ways to gain exposure to this growing market.
At Natural Resource Stocks, we’ve identified several rare earth elements ETFs that offer promising investment opportunities. These funds provide a convenient way to invest in a basket of companies involved in the exploration, mining, and production of these valuable resources.
What Are Rare Earth Elements and Why Do They Matter?
Definition and Importance of Rare Earth Elements
Rare earth elements (REEs) comprise a group of 17 metallic elements that play a vital role in modern technology and green energy applications. Despite their name, these elements are not scarce in the Earth’s crust. However, their economic extraction often proves challenging, making their production and supply strategically important.
The Booming Demand for REEs
The demand for rare earth elements has surged in recent years, driven by their essential role in various high-tech and clean energy applications.
Key industries fueling this demand include:
- Electric vehicles: REEs are essential for permanent magnets in electric motors and generators.
- Wind turbines: Large quantities of neodymium and dysprosium are necessary for powerful magnets in wind turbine generators.
- Consumer electronics: Smartphones, laptops, and other devices rely on REEs for various components.
- Defense technologies: Military applications (such as guidance systems and night-vision equipment) use REEs extensively.
Global Production and Key Players
China currently dominates global rare earth production, accounting for over 69% of worldwide production. This concentration of supply raises concerns about potential supply chain disruptions and geopolitical risks.
Other significant producers include:
- Australia: The Mount Weld mine (operated by Lynas Rare Earths) stands as one of the world’s largest rare earth deposits outside China.
- United States: Mountain Pass mine in California (operated by MP Materials) is the largest rare earth element mining and processing facility in North America.
- Myanmar: A significant producer of heavy rare earth elements, although political instability affects production.
Challenges and Opportunities in the REE Market
The rare earth elements market faces several challenges, including environmental concerns associated with mining and processing, as well as the need for more sustainable and efficient extraction methods. These challenges also present opportunities for companies developing innovative technologies to address these issues.
Investors who want to capitalize on the growing rare earth elements market should consider the geopolitical factors, technological advancements, and environmental regulations that may impact the industry’s future. As the world transitions towards cleaner energy sources and more advanced technologies, the importance of rare earth elements will likely continue to grow, potentially offering significant investment opportunities in this sector.
With the increasing significance of rare earth elements in various industries, many investors turn to ETFs as a way to gain exposure to this market. In the next section, we will explore some of the top rare earth elements ETFs that investors should watch closely.
Top Rare Earth Elements ETFs to Consider
VanEck Rare Earth/Strategic Metals ETF (REMX)
The VanEck Rare Earth/Strategic Metals ETF (REMX) stands as one of the most established and liquid ETFs in the rare earth elements space. REMX tracks an index comprised of global companies with a “pure-play” focus, including miners, refiners, and producers of rare earth and strategic metals.
As of June 2025, REMX manages approximately $1.2 billion in assets with an expense ratio of 0.53%. The fund holds about 25 companies, providing investors with exposure to some of the most significant players in the industry. REMX has significant exposure to Chinese companies, which aligns with China’s dominant position in the global rare earth elements market.
REMX has delivered strong performance in recent years, with a 5-year annualized return of 18.7% as of June 2025. However, investors should note the fund’s volatility, as it can experience significant price swings based on geopolitical events and changes in rare earth element prices.
Global X Critical Materials ETF (CMAT)
The Global X Critical Materials ETF (CMAT) entered the rare earth elements ETF space in 2022. CMAT tracks the Solactive Global Critical Materials Index, which includes companies that produce critical materials such as rare earth elements, lithium, and cobalt.
CMAT has a broader focus compared to REMX, including not only rare earth elements but also other critical materials essential for clean energy technologies. As of June 2025, the fund manages $450 million in assets with an expense ratio of 0.59%.
One advantage of CMAT is its more diversified geographic exposure, with holdings spread across North America, Australia, and Asia. This diversification may help mitigate some of the geopolitical risks associated with a heavy concentration in Chinese companies.
Sprott Energy Transition Materials ETF (SETM)
The Sprott Energy Transition Materials ETF (SETM) launched in 2023. SETM provides investors access to the miners who produce uranium, lithium, copper, nickel, silver, manganese, cobalt, graphite and rare earth elements.
While not exclusively focused on rare earth elements, SETM includes significant exposure to companies involved in rare earth production and processing. As of June 2025, the fund manages $320 million in assets with an expense ratio of 0.65%.
SETM stands out for its actively managed approach, which allows the fund managers to adjust holdings based on market conditions and opportunities. This flexibility may prove advantageous in the rapidly evolving rare earth elements market.
Factors to Consider When Choosing Rare Earth Elements ETFs
When evaluating these ETFs, investors should carefully consider several factors:
- Expense ratios: Compare the costs associated with each fund (REMX: 0.53%, CMAT: 0.59%, SETM: 0.65%).
- Liquidity: Assess the trading volume and bid-ask spreads of each ETF.
- Underlying holdings: Examine the specific companies and their weightings within each fund.
- Geographic exposure: Consider the regional distribution of holdings and associated geopolitical risks.
- Management style: Weigh the pros and cons of passive (REMX, CMAT) versus active (SETM) management.
These ETFs offer convenient exposure to the rare earth elements market, but they come with unique risks and challenges. The next section will explore additional factors investors should consider when investing in rare earth elements ETFs, including market trends and geopolitical influences that may impact this sector.
Key Factors for Investing in Rare Earth Elements ETFs
Geographic Exposure and Political Risk
The distribution of holdings in rare earth elements ETFs requires careful evaluation due to production concentration in specific regions. China’s market dominance results in many ETFs having substantial exposure to Chinese companies, as the country produces roughly 60% of the world’s supply of rare earths. This alignment with market realities introduces geopolitical risks.
The VanEck Rare Earth/Strategic Metals ETF (REMX) allocates approximately 40% of its holdings to Chinese companies (as of June 2025). The Global X Critical Materials ETF (CMAT) offers more diversified geographic exposure, with holdings across North America, Australia, and Asia.
Investors must assess their risk tolerance and consider how trade tensions or regulatory changes might impact ETFs with high exposure to a single country.
Fund Expenses and Performance
Expense ratios directly affect an ETF’s performance and warrant careful consideration. In the rare earth elements ETF space, expense ratios typically fall between 0.50% and 0.70%.
REMX carries an expense ratio of 0.53%, while CMAT and SETM have slightly higher ratios at 0.59% and 0.65%, respectively. These seemingly small differences can significantly impact returns over time, especially for long-term investors.
Comparing the historical performance of these ETFs against their benchmarks and each other is essential. However, past performance does not guarantee future results, particularly in the rapidly evolving rare earth elements sector.
Liquidity and Trading Considerations
Liquidity plays a critical role when investing in any ETF, but it holds particular importance for niche sectors like rare earth elements. ETFs with higher average daily trading volumes generally feature tighter bid-ask spreads, making them easier (and potentially less costly) to trade.
As of June 2025, REMX leads in liquidity among rare earth elements ETFs, with an average daily trading volume of about 200,000 shares. CMAT and SETM have lower trading volumes, which could result in wider bid-ask spreads and potentially higher trading costs.
Investors (especially those planning larger trades or frequent trading) should carefully consider the liquidity profile of these ETFs to minimize transaction costs and potential price impact.
Underlying Holdings and Rebalancing
The composition of an ETF’s underlying holdings and its rebalancing frequency can significantly impact its performance and risk profile. Investors should examine the specific companies included in each ETF and their respective weightings.
REMX holds a basket of securities involved in the mining, refining, and manufacturing of rare earth and strategic metals. CMAT and SETM have broader mandates, including companies involved in other critical materials beyond rare earth elements.
The rebalancing frequency of these ETFs varies. REMX and CMAT rebalance quarterly, while SETM (being actively managed) can adjust its holdings more frequently in response to market conditions.
Investors should align their investment goals with the ETF’s focus and management style. Those seeking pure exposure to rare earth elements might prefer REMX, while investors looking for broader critical materials exposure might find CMAT or SETM more suitable.
Final Thoughts
The demand for rare earth elements continues to surge, driven by technological advancements and the global shift towards clean energy. Rare earth elements ETFs present a compelling investment opportunity, with VanEck Rare Earth/Strategic Metals ETF (REMX), Global X Critical Materials ETF (CMAT), and Sprott Energy Transition Materials ETF (SETM) standing out as top options. Each ETF offers unique advantages, and the choice depends on individual investment goals, risk tolerance, and market outlook.
Investors must conduct thorough due diligence when selecting rare earth elements ETFs. Factors such as geographic exposure, expense ratios, liquidity, and underlying holdings play important roles in determining an ETF’s suitability. The concentration of rare earth element production in specific regions (particularly China) introduces geopolitical risks that warrant careful consideration.
Natural Resource Stocks recognizes the importance of staying informed about the latest trends and opportunities in the rare earth elements market. Our platform offers expert analysis, market insights, and a community of investors to help you navigate this complex yet potentially rewarding sector. You can make more informed decisions about rare earth elements ETFs and other natural resource investments with our resources.
