The U.S. and China seem to be aiming to settle their differences on tariffs and issues associated with trade. Both superpowers appear to have settled on a deal that could give critical minerals a boost following a high-stakes meeting.
Among the topics that were up for discussion was rare earth minerals. U.S. president Donald Trump and China’s president Xi Jinping reportedly came to an agreement. One condition was that China would hit the pause button on export controls implemented in early October. President Trump responded in kind by dropping the threat of 100% tariff hikes on China imports.
The recent export controls did cause alarm to not just the U.S., but globally. According to data from the International Energy Agency, China is responsible for about 61% of rare earth minerals production along with 92% of the global output when it comes to processing. Needless to say, this makes China a prime source for critical minerals that are in heavy demand due to their usage in a wide variety of applications, such as clean energy technology and the buildout of artificial intelligence (AI) data centers. This could further fuel increased reliance on China as well as create a potential supply crunch as demand for these minerals amplifies.
Director of ETF product management Steve Schoffstall discussed these factors with Bloor Capital.
“We’re starting to see countries realize that, because China has a stranglehold on many of these critical materials, such as rare earths, where it is the biggest producer and supplier globally, they’re looking to increase domestic supply and encourage energy mining and refining within their own borders,” Schoffstall said.
“China, realizing that it has the pole position as it relates to the refining and production of rare earths, has really used that position to leverage trade negotiations with the U.S.,” he added. “What we’re starting to see now is the U.S. and other Allied countries like Australia and Canada working together cooperatively to secure those supply chains.”
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Critical Minerals Exposure in 1 ETF
Given these geopolitical ramifications, the demand for critical minerals supports the investment case for companies that operate within this space. Investors can position themselves to capture this potential upside with the Sprott Critical Materials ETF (SETM). While investors could conduct their own research and subsequently build a portfolio of individual stocks, SETM offers an easier path to exposure.
SETM tracks the Nasdaq Sprott Critical Materials Index. It includes global constituents strategically positioned to capture growth in companies operating within the critical minerals space. Constituents within the index include mining companies necessary for the production of uranium, lithium, copper, nickel, silver, manganese, cobalt, graphite, and other rare earth elements.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Content Hub.
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