Rare Earths: The Strategic Cornerstone of Geopolitical Resilience and Long-Term Investment

In an era of escalating geopolitical tensions and supply chain fragility, rare earth elements (REEs) have emerged as both a vulnerability and a strategic asset. These 17 chemically similar metals-critical to clean energy technologies, defense systems, and advanced manufacturing-are now at the epicenter of global power competition. From 2023 to 2025, the rare earth sector has demonstrated its dual role as a geopolitical weapon and an investment haven, driven by China's dominance, Western countermeasures, and the accelerating green energy transition.

China's Strategic Leverage and the Fragility of Global Supply Chains

China's control over 60% of global rare earth mining and 80–90% of processing capacity, according to Rare Earth Supply Chain Impact, has allowed it to weaponize its supply chains. In 2023, Beijing imposed export restrictions on gallium and germanium, two critical components in semiconductors and solar panels, sending shockwaves through global markets, as the Rare Earth Supply Chain Impact report noted. This "mineral diplomacy" mirrors historical tactics, such as the 2010 rare earth export delays to Japan during a territorial dispute, which caused prices to spike by over 1,000%, according to a ScienceDirect study.

The 2024 production halt in Myanmar-a key source of dysprosium and terbium-further exposed the sector's fragility. Regional instability, port congestion, and labor strikes have compounded volatility, with rare earth prices fluctuating by 30–50% annually, the Rare Earth Supply Chain Impact report found. For investors, this underscores a paradox: while REEs are essential for decarbonization, their supply chains remain hostage to geopolitical chess moves.

Western Countermeasures: Diversification and Strategic Partnerships

Faced with China's dominance, the U.S., EU, and other nations have prioritized supply chain resilience. The U.S. Export-Import Bank's Supply Chain Resiliency Initiative (SCRI) has become a flagship effort, financing projects in Australia, Brazil, and Vietnam to secure off-take agreements for American manufacturers. For instance, SCRI's support for Australia's Goschen rare earth project-a $2 billion venture-highlights the shift toward "friend-shoring," as ExIm has documented.

Vietnam, once a U.S. adversary, now epitomizes this realignment. In 2023, the two nations elevated their relationship to a "comprehensive strategic partnership," with Vietnam's Lai Châu rare earth mine (operated by state-backed Vietnam Rare Earth JSC and Australian firm Blackstone Minerals) positioning the country as a key alternative to China, according to Elemental Bonds. Similarly, Canada and Brazil have seen increased investment in mining and refining, albeit hampered by permitting delays and environmental scrutiny, the Rare Earth Supply Chain Impact report noted.

The European Union's Critical Raw Materials Act, enacted in 2023, mandates 30% domestic processing capacity by 2030, while Japan has deepened ties with Australia and India to bypass Chinese bottlenecks, according to a 2025 industry overview. These efforts, however, face headwinds: refining infrastructure remains underdeveloped outside China, and new projects require 5–10 years to reach scale, the Rare Earth Supply Chain Impact report warns.

Sectoral Performance: Stocks, ETFs, and Geopolitical Hedging

The rare earth sector's financial performance from 2023–2025 reflects its strategic value. Upstream miners like MP Materials (USA) and Lynas Rare Earths (Australia) have surged, with MP's stock doubling in 2025 after securing a U.S. government-backed price floor for neodymium and praseodymium, according to a rare-earth stocks report. Lynas, the largest non-Chinese producer, saw a 50% share price jump as automakers scrambled for alternatives, as the ScienceDirect study documents.

Investor behavior has mirrored this trend. The VanEck Rare Earth/Strategic Metals ETF (REMX) and Global X Lithium & Battery Tech ETF (LIT) attracted $850 million and $1.2 billion in assets, respectively, by mid-2025, according to a rare-earth ETF guide. During periods of geopolitical stress-such as China's 2023 gallium restrictions-these ETFs outperformed traditional portfolios, validating their role as a "geopolitical hedge," as Elemental Bonds observes.

Challenges and the Path Forward

Despite progress, structural challenges persist. China's grip on 85% of global rare earth refining means even diversified mining cannot fully insulate markets from disruption, as Elemental Bonds notes. Recycling and urban mining-extracting REEs from discarded electronics-remain nascent but are gaining traction, with Apple and others investing in closed-loop systems, the Rare Earth Supply Chain Impact report observes.

For investors, the key lies in balancing exposure to resilient miners (e.g., MP Materials, USA Rare Earth) with companies advancing recycling technologies. Governments, meanwhile, must accelerate permitting reforms and subsidize refining infrastructure to close the "processing gap."

Conclusion: A Strategic Asset in a Fractured World

Rare earths are no longer just commodities-they are geopolitical currency. As the green energy transition accelerates and great-power competition intensifies, REEs will remain a focal point for both risk and opportunity. For long-term investors, the sector offers a unique blend of industrial necessity and strategic resilience, provided they navigate its volatility with a clear-eyed understanding of the geopolitical chessboard.