Geopolitical tensions escalate, catalyzing rare earth concept stocks to usher in an investment boom

Amid the ongoing escalation of US-China trade tensions, the rare earth sector is becoming a market focus. On October 9, China announced further upgrades to its rare earth export control measures, adding five more rare earth metals to the existing seven to be subject to export restrictions. This policy adjustment quickly triggered a chain reaction in the capital markets.

The Logic Behind the Collective Rise of Rare Earth Concept Stocks

The high dependence of the global rare earth supply chain on China makes any policy adjustments capable of triggering market revaluation. China accounts for nearly 70% of global rare earth production, and US demand for imported rare earths mainly comes from China. Justin Lin, an investment analyst at Global X Management based in Sydney, pointed out that China’s move sends a clear signal to the world—that it holds the pricing power and supply control in the rare earth sector. This dominant position is expected to persist in the foreseeable future.

As geopolitical risks in the supply chain become a renewed focus, investor attention to rare earth resources has significantly increased. Since October, rare earth concept stocks have performed remarkably. American Resources (AREC) has gained a total of 126%, Critical Metals (CRML) has performed even better with a total increase of 382%, and Energy Fuels (UUUU) has risen by 71% overall. On October 14 alone, AREC surged 36.75%, CRML increased 28.74%, and UUUU rose over 10%.

Strengthened US Strategic Response and Policy Expectations

In response to potential risks in China’s rare earth supply, the US government has adopted a multi-pronged strategy. Over the past few months, the US government has made strategic investments in rare earth miners MP Materials and Trilogy Metals, and is evaluating investments in Critical Metals. These measures aim to establish a domestic rare earth supply chain and reduce reliance on external sources.

Financial institutions are also actively involved. JPMorgan Chase has committed to investing $1.5 trillion over the next decade into industries that can enhance US economic security and resilience, with a focus on critical minerals. This substantial capital commitment injects strong momentum into the development of the rare earth industry and further boosts market confidence.

Demand-Side Support Builds the Foundation for Price Rise

On the demand side, strong growth in the robotics and electric vehicle industries provides solid support for the rare earth market. Macquarie Research indicates that the expansion momentum of these two sectors will drive continuous growth in rare earth demand. Meanwhile, with global supply constrained by China’s export controls, the market will face a long-term supply-demand imbalance.

Research institutions like Jefferies remain optimistic about the prospects of rare earth concept stocks, maintaining buy ratings on leading stocks such as MP Materials, indicating that investment opportunities in rare earth concept stocks still have room to grow.