In recent years, the term rare earths has entered the vocabulary of those working in economics, geopolitics and investment. But what exactly are rare earths? Why do they represent a crucial strategic asset in the global context? And in what way can they influence investor decisions?

What are rare earths

The term rare earths refers to a group of 17 chemical elements: the 15 lanthanides of the periodic table, plus scandium and yttrium. Despite the name, these metals are not necessarily “rare” in an absolute sense: some are relatively abundant in the Earth’s crust. However, they are often found in very low concentrations and are difficult to extract and separate, which makes their sourcing costly and complex.

These elements possess unique properties — magnetic, catalytic, optical — that make them fundamental to numerous modern technologies.

Industrial applications: from mobile phones to military aircraft

Rare earths have become indispensable to many industrial sectors. Some key examples:

  • Consumer technology: smartphones, laptop computers, LED screens, rechargeable batteries.
  • Green energy: wind turbines, electric motors, fuel cells.
  • Defence and aerospace: radar, guidance systems, stealth aircraft.
  • Electric vehicles: high-performance motors, accumulators and permanent magnets.
  • Petrochemical industry: oil refining and catalyst production.

Without rare earths, many of the technologies underpinning the energy transition (and the digital economy) would be impossible to produce.

The geopolitical knot: China at the centre of the game

The production and processing of rare earths are highly concentrated. Over 60% of global extraction and over 80% of refining take place in China. This imbalance has given Beijing enormous strategic power.

On several occasions, China has threatened — or actually imposed — export restrictions as a tool of diplomatic pressure. The most well-known case dates to 2010, when it interrupted supplies to Japan during a territorial dispute.

In recent years, the United States, the European Union and other countries have begun to respond, investing in alternative supply chains (Australia, Canada, Africa) and in technologies for the recycling or partial substitution of rare earths. However, building an independent supply chain will take years.

Implications for financial markets

From an investment perspective, rare earths represent a strategic lever for both risk and opportunity.

  • Price volatility: the prices of these metals are subject to significant fluctuations linked to political events, trade restrictions or supply chain crises.
  • ETFs and thematic equities: funds exist that invest in mining companies active in the sector, or in companies that are heavily dependent on these resources (electric automotive, renewables, high-tech).
  • Systemic risk: a significant disruption in the availability of rare earths can generate cascade effects on global industry, slowing key transitions such as the energy or digital transformation.

In a context of growing geopolitical tension and accelerating energy transition, the strategic management of rare earths is becoming a critical factor also for the industrial and monetary policies of advanced economies.

Conclusions

Rare earths are far more than a laboratory curiosity: they represent the invisible backbone of technological innovation and sustainability. For those working in financial advisory, monitoring the evolution of this sector — and its geopolitical implications — is essential to understanding emerging risks and identifying new investment opportunities.