The launch of the Sprott Rare Earths Ex-China ETF (NASDAQ: REXC) underscores a strategic shift in the rare earths market, as Western-aligned companies seek to reduce dependence on Chinese supplies amid ongoing geopolitical tensions. China mines 60% of the global supply and processes 80% of those materials, according to a 2025 report from Resources for the Future. This dominance has raised concerns about supply chain vulnerabilities, especially after the Chinese government threatened to end rare earth exports in October 2025 during a tariff dispute with the United States.
The Sprott Rare Earths Ex-China ETF is designed to track the Nasdaq Sprott Rare Earths Ex-China Index, focusing on companies that generate at least 50% of their revenues from rare earth and strategic metals outside China. This fund is part of Sprott's expanding suite of critical materials ETFs, which includes the Sprott Critical Materials ETF (NASDAQ: SETM). REXC aims to provide pure-play exposure to rare earth materials while navigating geopolitical risks associated with Chinese production.
Rare earth elements (REEs) are crucial for modern technologies, including electronics, renewable energy, magnets, batteries, and catalysts. The U.S. military also relies heavily on these minerals. The need to develop a stronger rare-earth industry outside China has been made clear by the current administration, which supports more domestic and non-China sources. Despite the initial Chinese threat, the administration was able to negotiate a deal that temporarily eased tariffs in exchange for a one-year hold on export restrictions.
REXC offers investors a way to hedge against the risks of Chinese dominance in this sector. The fund invests in the largest and most liquid companies, with significant exposure to small- and micro-caps and emerging-market issuers. It rebalances quarterly. As Marco Rubio noted in a 2019 speech, the assumption that China would become more democratic and rule-abiding as it grew wealthier has not held true, making dependence on Chinese rare earths a national security concern.
The Sprott Rare Earths Ex-China ETF is the first ETF with such a focus, providing retail investors access to rare earth investments through a single fund available at online brokerages. For more information, including risks and expenses, investors can view the Statutory Prospectus.
