Rare earth soared and pulled back, but the global resource war is far from over

• Rare earth prices saw sharp swings over the past month. While competition for rare earths remains a long-term theme, January’s volatility was largely decoupled from industrial fundamentals and instead driven by geopolitical positioning.

• Despite sentiment-driven fluctuations, underlying demand remains robust, supported by renewable energy deployment and rising AI-related demand, while supply remains structurally tight and highly concentrated in China.

• Although the US has scaled back certain measures such as price floor guarantees, broader policy support remains strong. Building an “ex-China” rare earth supply chain continues to be a long-term strategic objective.

• Earnings visibility across the sector is improving, supported by higher rare earth oxide prices and capacity expansions outside China, which are driving profitability and margin expansion.

• Following the recent pullback, valuations are now better aligned with fundamentals. We continue to recommend the sector and see approximately 17% upside through FY2027, with a target price of USD 104 for the VanEck Rare Earth and Strategic Metals ETF (NYSE: REMX).

The rare earth market in 2026 has become a textbook example of geopolitical-driven volatility. After surging 31% to approximately USD 780 on 28 January 2026, the MVIS Global Rare Earth/Strategic Metals Index corrected by 13% within the next three trading days before consolidating around the USD 700 level. (Figure 1).

Figure 1: Rare earth and critical materials sector experienced a year-to-date rollercoaster

Geopolitics, not fundamentals, driving the price action

The sharp rally was initially sparked by a Japan-specific escalation. On 6 January 2026, China’s Ministry of Commerce announced targeted export controls on rare earths and high-performance magnets to Japan. The move was widely seen as retaliation for Japan’s diplomatic remarks in November 2025, which suggested that a Chinese attack on Taiwan threatening Japan’s survival could trigger a military response. As Japan is the world’s second-largest rare earth magnet producer, the targeted restriction sent immediate ripples through the global supply chain, heightening concerns over rare earth accessibility and fuelling market volatility.

Momentum picked up further in mid-January as the market entered a “Greenland hype” phase. Comments from the White House suggesting that the US could secure access to Greenland’s estimated 36 million tonnes of rare earth reserves sparked a surge of investor interest. Rare earth equities, including Critical Metals Corp, saw significant inflows as the market embraced the narrative that US control over Greenland could rapidly challenge China’s near-monopoly position.

The rally began to unravel on 26 January 2026, when Greenland’s Minister for Mineral Resources publicly rejected the notion of “trading minerals for sovereignty”. Industry experts also highlighted that Greenland’s rare earth projects could require up to 18 years to reach commercial production, sharply contradicting the market’s assumption of an imminent supply breakthrough.

The decisive trigger for the sell-off, however, came when President Trump stepped back from plans to guarantee minimum prices for US critical mineral projects. Potential reasons cited included insufficient congressional funding and the complexity of implementing market-wide pricing guarantees. As a result, the valuation premium previously assigned to US rare earth companies evaporated rapidly. The sell-off was further compounded by a sharp decline in gold and silver prices, which prompted investors to take profits across the broader critical materials and rare earth sector.

The rapid rise and fall in rare earth prices in January highlights how far the sector has decoupled from industrial fundamentals, evolving instead into a pure geopolitical trade.

Building an “ex-China” rare earth supply chain remains a long-term objective

While sentiment-driven trading has dominated rare earth price movements over the past month, the structural imbalance between surging demand and constrained supply remains firmly intact.

Demand for rare earth elements is set to accelerate further as clean energy technologies and AI adoption scale up. Each electric vehicle equipped with a permanent magnet motor requires approximately 2 kg of Neodymium Iron Boron (NdFeB) magnets, while a direct-drive wind turbine can consume 600–800 kg of rare earth materials, with particularly heavy usage of dysprosium and terbium. Beyond electrification, incremental demand is also emerging from AI data centres, driven by cooling systems and server hard drives, as well as from humanoid robotics, adding a new layer of structural demand.

Reflecting these trends, market research firms such as Grand View Research project an industry compound annual growth rate (CAGR) of 8.7% through 2030, while several other estimates point to close to 10% CAGR over the next decade.

On the supply side, conditions remain tight and highly concentrated. China continues to represent the critical global chokepoint, controlling approximately 69% of the global mine production (Figure 2). Its strict quota and traceability systems effectively cap global supply growth. Outside China, new rare earth projects typically require often a decade to reach commercial production. As a result, supply is unlikely to catch up with rising demand in the near to medium term. Recent developments, including China’s targeted export restrictions on Japan, have highlighted the fragility of global supply chains, particularly for Western economies.

Figure 2: China accounted for 69% of global rare earth production in 2024

As rare earths have become increasingly critical to national security and technological leadership, Western governments remain committed to building an “ex-China” supply chain, even if progress is gradual.

In the US, while recent proposals for price floor guarantees have been scaled back, broad policy support for the sector remains strong. This includes regulatory streamlining, tax incentives, and the launch of “Project Vault”, a critical minerals reserve valued at nearly USD 12 billion aimed at protecting the rare earth and strategic materials supply chain from potential disruptions. The US government has also maintained direct equity investments in the industry, most recently committing USD 1.6 billion to USA Rare Earth, following earlier backing for companies such as MP Materials and Lithium Americas, reinforcing support for sector growth.

Outside the US, policy momentum is also building. Australia, the world’s second-largest rare earth producer, has reaffirmed its plans to establish a AUD 840 million critical minerals strategic reserve, prioritising materials such as antimony, gallium, and rare earth elements, with initial implementation expected by 2H2026. While the US has stepped back from explicit price floor mechanisms, the Australian government is still evaluating similar measures to support domestic critical mineral projects.

Chinese pricing signals continued earnings growth

The abandonment of US price floor mechanisms has further reinforced China’s role as the gravitational centre of global rare earth pricing. This dominance is not political but structural, reflecting China’s position as the world’s largest and most integrated rare earth supplier. Even projects marketed as “China-independent” remain implicitly indexed to Chinese pricing, given the absence of alternative benchmarks with sufficient depth and liquidity. This dynamic is likely to persist until non-Chinese supply can reliably meet global demand at scale - a threshold that no Western supply chain appears close to achieving in the near term.

Neodymium–Praseodymium (NdPr) Oxide prices, a core revenue driver for both mining and processing companies, have continued their upward trend and are currently trading at approximately CNY 732,500 per tonne (Figure 3). In contrast to the sharp volatility seen in rare earth equity prices, NdPr Oxide pricing more closely reflects underlying structural imbalance between supply and demand.

Figure 3: NdPr Oxide prices maintain strong upward momentum

Sustained strength in oxide prices is therefore likely to translate into higher earnings and margin expansion across the rare earth sector, providing clearer earnings visibility than equity price movements alone would suggest.

Several top holdings in the MVIS Global Rare Earth/Strategic Metals Index are approaching a meaningful operational inflection point. MP Materials, for example, is transitioning from a capital-intensive construction phase into production in 2026. During the company’s 3Q25 earnings call, CEO James Litinsky confirmed that new heavy rare earth processing capacity is expected to come online by mid-2026, with a targeted annual output of 10,000 metric tonnes of NdFeB magnets. This marks a critical step in moving further downstream and improving margin capture. Meanwhile, the more established Australia-based Lynas Rare Earths is expected to deliver roughly double its earnings growth in 2026, supported by firmer NdPr Oxide pricing, and ongoing capacity ramp-ups across its processing facilities.

Table 1: Earnings estimates for the top 10 holdings of the MVIS Global Rare Earth/Strategic Metals Index

Holding Name	Geographic Allocation	Weight	2025 EPS	2026 EPS	EPS Growth
Albemarle Corp	US	8.4%	-0.81	3.42	-
China Northern Rare Earth Group High-Tech Co Ltd	China	7.1%	0.73	1.01	39%
Lynas Rare Earths Ltd	Australia	6.7%	0.02	0.30	1927%
Xiamen Tungsten Co Ltd	China	6.3%	1.61	1.93	20%
MP Materials Corp	US	6.1%	-0.37	0.58	-
PLS Group Ltd	Australia	5.6%	-0.02	0.13	-
Sociedad Quimica y Minera de Chile SA - Depositary Receipt	Chile	5.5%	2.21	4.66	111%
Jinduicheng Molybdenum Co Ltd	China	5.1%	0.99	1.03	5%
Almonty Industries Inc	Canada	4.9%	-0.31	0.30	-
Liontown Ltd	Australia	4.6%	-0.04	0.02	-
Source: Bloomberg Finance L.P., iFAST Compilations. Data as of 10 Feb 2026.

VanEck Rare Earth and Strategic Metals ETF: A gateway to the growing rare earth market

Recent sharp corrections in rare earth equities have helped restore a healthier balance between prices and fundamentals. As the global economy increasingly pivots toward AI, electrification, and advanced manufacturing, rare earth elements are emerging as strategic inputs rather than cyclical commodities. Their critical role in electric vehicles, renewable energy, data centres, and next-generation technologies positions the sector to benefit from long-term structural megatrends.

The VanEck Rare Earth and Strategic Metals ETF (NYSE: REMX) offers investors a diversified and efficient way to gain global exposure to this theme. The ETF seeks to replicate the MVIS Global Rare Earth/Strategic Metals Index, which tracks companies involved across the entire rare earth value chain, including mining, refining, processing, and recycling of rare earth and other critical metals.

While China remains the largest market allocation at 32.1%, the ETF also includes emerging players from Australia, the US, and Canada, giving investors exposure to both established leaders and firms that are innovating and expanding their capacity (Figure 4).

Figure 4: REMX ETF provides access to major global critical materials companies

Based on a fair PE of 33X, we estimate the MVIS Global Rare Earth/Strategic Metals Index could reach USD 831, representing a 17.1% upside. This translates to a target price of around USD 104 for the VanEck Rare Earth and Strategic Metals ETF (NYSE: REMX).

With upside now more limited compared to our previous recommendation and given the high volatility driven by shifting geopolitical dynamics and sentiment, we believe it is prudent for more conservative investors to take some profits at this level. Should prices move above our target in a short period, we would caution against chasing the rally.

That said, we remain confident that rare earths are a compelling long-term investment theme, supported by durable demand growth and structurally constrained supply. For investors with a higher risk tolerance, the REMX ETF remains worth holding, as the global resource race is far from over.

Related article: Rare earth: The engine behind modern technologies is in high demand

Table 2: MVIS Global Rare Earth/Strategic Metals Index’s earnings projections

	2024	2025E	2026E	2027E
PE Ratio	91.5	77.1	50.8	28.2
Earnings Growth	-78.2%	18.7%	51.7%	80.3%
EPS	7.8	9.2	14.0	25.2
Projected Fair Price (Based on fair PE ratio of 33X)				831
Upside				17.1%
Source: Bloomberg Finance L.P., iFAST Compilations. Data as of 10 Feb 2026.

Figure 5: Index price vs. EPS

Declaration:

For specific disclosure, at the time of publication of this report, the analyst who produced this report and IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.