New ETF Offers Rare Earth Exposure While Bypassing Chinese Market Dominance

China mines 60% of the global supply of rare earth elements and processes 80% of those materials, according to a 2025 report from Resources for the Future. This concentration creates significant supply chain vulnerabilities for Western industries and militaries that rely heavily on these minerals for technologies ranging from electronics and renewable energy to defense systems. The geopolitical tension was highlighted last October when the Chinese government threatened to end rare earth exports during tariff negotiations, though a temporary agreement was reached where the U.S. would not apply tariffs as high as 130% and would cut existing tariffs in exchange for China holding off on export restrictions for a year.

The recently launched Sprott Rare Earths Ex-China ETF (NASDAQ: REXC) addresses this vulnerability by providing investment exposure to the rare earth materials industry while excluding companies located within China. The fund tracks the Nasdaq Sprott Rare Earths Ex-China Index and invests in rare earth miners and producers operating outside the world’s largest rare-earth market. This approach is designed for investors seeking pure-play exposure to rare earth materials while navigating geopolitical risks associated with Chinese production.

Rare earth elements are crucial for modern technologies, including magnets, batteries, and catalysts used in electrification and semiconductor manufacturing. Despite their name, some rare earth elements are relatively abundant in the Earth’s crust, but processing and production have become concentrated in China. The Sprott Rare Earths Ex-China ETF is part of Sprott’s expanding suite of critical materials ETFs, which includes the Sprott Critical Materials ETF (NASDAQ: SETM). The fund rebalances quarterly and invests in the largest and most liquid companies that generate at least 50% of their revenues from the rare earth and strategic metals segment.

Marco Rubio highlighted the national security implications in a 2019 speech at the National Defense University, questioning what happens when an industry critical to national interest becomes dominated by a geopolitical competitor. The rare earth sector is increasingly viewed as a key component of both national security and green energy supply chains, with the potential for China to use its market leverage to influence geopolitical policy. For retail investors, the rare-earth space presents unique opportunities for diversification and hedging against supply chain disruptions. The fund has significant exposure to small- and micro-cap companies and emerging-market issuers, which are typically involved in producing elements like cerium.

Developing non-China sources for these critical materials continues to be a priority for Western governments and industries seeking to reduce dependency on a single supplier. The Sprott Rare Earths Ex-China ETF represents a financial instrument that aligns with this strategic shift while offering investors access to a specialized sector through a single investment vehicle available at online brokerages.

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