Executive Summary (TL;DR)

This report provides a comprehensive analysis of the global rare metals, rare earth metals, and dispersed metals (collectively referred to as “strategic metals”) industry, aiming to offer in-depth insights and actionable strategies for sophisticated investors seeking opportunities in the secondary market. The core investment thesis is that strategic metals represent a generational investment opportunity, driven by the two major macro trends of global decarbonization and digitalization. However, this opportunity is intrinsically linked with significant geopolitical risks, supply chain vulnerabilities, and market volatility.

Global demand for key materials such as lithium, cobalt, neodymium, gallium, and germanium is being driven on an unprecedented scale by the need for electric vehicles, wind power generation, high-performance semiconductors, and defense technologies. The analysis indicates that the supply side of these metals is geographically highly concentrated, especially in the midstream smelting and processing stages, where China holds an undisputed dominant position. This imbalance in the supply-demand structure points towards a long-term price upcycle, but it also poses significant challenges to the stability and security of the supply chain.

This report delves into the investment value of this sector, weighing the “supercycle” potential driven by structural demand growth against inherent risks such as resource nationalism, technological substitution, and severe price volatility. The report ultimately concludes that for investors with a long-term perspective and a high tolerance for risk, the strategic metals sector offers significant investment value.

For the average investor, the report proposes a core-satellite portfolio strategy. It recommends using broadly diversified exchange-traded funds (ETFs) as the core allocation to mitigate single-company risk, while selectively allocating a small amount of capital to specific “supply chain champion” stocks as a satellite strategy to capture specific growth opportunities arising from the global supply chain restructuring. This report aims to provide investors with a clear roadmap to make informed investment decisions in this complex yet promising strategic industry.

Chapter 1: Defining the Opportunity: An Introduction to Strategic Metals

1.1 Clarifying Concepts: Rare Metals, Rare Earth Metals, and Dispersed Metals

To build a clear investment framework, the first task is to precisely define the categories of metals discussed in this report. In industry and investment circles, “rare metals” is often a broad commercial term rather than a strict scientific classification, referring to metals that are vital to the national economy and defense security due to their scarcity in the Earth’s crust, dispersed distribution, and difficulty in extraction.¹ For a precise investment analysis, it is essential to break them down into three core categories based on their geochemical properties and national economic industry classification standards.²

• Rare Metals: This is a broad category that includes a variety of elements with strategic value. Based on their physical and chemical properties, they can be further subdivided into rare light metals (e.g., Lithium Li, Rubidium Rb, Cesium Cs), rare high-melting-point metals (e.g., Tungsten W, Niobium Nb, Tantalum Ta, Zirconium Zr), and rare precious metals. These metals are key components of batteries, specialty alloys, and high-tech materials.¹

• Rare Earth Metals (REEs): This specifically refers to the 17 chemical elements in the lanthanide series of the periodic table, plus Scandium (Sc) and Yttrium (Y). Despite the “rare” in their name, some rare earth elements are not particularly scarce in the Earth’s crust. Their rarity lies in the difficulty of finding them in economically exploitable deposits and the extreme complexity of their separation and purification processes. Among them, elements like Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy), and Terbium (Tb) are crucial for manufacturing high-performance permanent magnets, making them the indispensable “industrial vitamins” of modern high-tech industries.²

• Dispersed/Scattered Metals: This category includes elements such as Gallium (Ga), Germanium (Ge), Indium (In), Selenium (Se), and Tellurium (Te). Their defining characteristic is their extremely low abundance in the Earth’s crust and the fact that they rarely form independent mineral deposits. They are typically “dispersed” in very low concentrations within the ores of other major metals and are extracted as by-products. For example, gallium is primarily recovered from the processing of bauxite (aluminum ore), while germanium is mainly a by-product of lead-zinc ore smelting.² This “co-product” or “by-product” nature is key to understanding their supply elasticity and is a core source of their supply chain vulnerability. Because their production is tied to the mining and market conditions of the primary metals (like aluminum or zinc), their supply cannot be easily and quickly increased independently, even if their own demand surges. This inelasticity of supply means that even minor changes in demand can trigger dramatic price fluctuations, presenting unique opportunities and risks for investors.

1.2 The New Oil: Why These Metals are Crucial for the 21st Century Economy

Strategic metals are not ordinary industrial commodities; they are the “enabling materials” that make almost all modern high-tech and green energy applications possible.⁴ Their strategic importance has transcended the purely economic level to become a matter of national security.

The U.S. government’s definition of “critical minerals” accurately captures this characteristic: essential to the economic and national security of the United States, with a supply chain vulnerable to disruption, and serving an essential function in the manufacturing of a product, equipment, or technology.⁷ This definition elevates the investment thesis from a simple supply-demand analysis to a geostrategic and national security level. The “Critical Minerals List” of 50 minerals published by the U.S. Geological Survey (USGS) provides investors with an investment guide validated by national-level strategic assessment. The elements on this list (such as lithium, cobalt, gallium, germanium, and rare earth elements) are the core focus of this report.⁷ These metals are the physical foundation for the global economy’s transition to a low-carbon and intelligent future, and their strategic value is comparable to that of oil in the 20th century.

1.3 Global Market Dynamics: Scale, Growth, and Future Projections

From a macroeconomic perspective, the strategic metals sector is in a phase of rapid growth, far outpacing traditional commodities.

• Rare Earth Metals Market: Market size data varies depending on the statistical scope of different institutions, but the growth trend is highly consistent. One report shows the global rare earth metals market was valued at $15.3 billion in 2023 and is projected to grow to $30.1 billion by 2032, with a compound annual growth rate (CAGR) of over 10.8% from 2024 to 2032.⁹ Another report estimates the market size at $3.39 billion in 2023, expected to reach $8.14 billion by 2032, with a CAGR of 10.2% during the forecast period.¹⁰ This discrepancy may stem from different definitions of the market scope (e.g., whether it includes only mineral products or also downstream applications like magnets), but the strong double-digit growth expectation is a shared conclusion. The magnet market, the primary application for rare earths, reached a scale of $4.2 billion in 2023 and is expected to continue growing at a CAGR of 9%.⁹

• Market Comparison and Positioning: To better understand the growth potential of the strategic metals market, it can be compared with the precious metals market. In 2023, the global precious metals market was valued at $306.44 billion and is projected to reach $501.09 billion by 2032, but its CAGR during the forecast period is only 5.6%.¹¹ This indicates that while the absolute size of the strategic metals market is currently smaller, it is on a much steeper growth curve than the mature precious metals market, exhibiting typical characteristics of a growth industry.

• Broad Prospects Driven by Energy Transition: On a more macro level, the market for critical minerals directly related to the energy transition alone reached $325 billion in 2023, a volume comparable to the iron ore market.⁵ This reveals the enormous scale of the end markets served by strategic metals, signaling vast future growth potential. As countries worldwide increase investment in mining and processing capabilities to ensure supply chain stability, the strategic importance of these metals in the global economy is becoming increasingly prominent.⁹

Chapter 2: Macro Trends Driving Structural Demand

The demand growth for strategic metals is not driven by short-term economic cycles but by the structural, long-term transformation of the global economy over decades. Two core trends—the green energy revolution and digitalization coupled with defense modernization—form the solid foundation of their demand. This dual-driver nature of demand provides unique resilience to an investment portfolio.

2.1 The Green Energy Revolution: Powering the Transition

The global consensus on combating climate change and achieving “carbon neutrality” is the most powerful long-term demand driver for strategic metals. This process is profoundly reshaping the energy and transportation sectors, creating immense demand for specific metals.⁴

• Electric Vehicles (EVs): As the core of decarbonization in the transportation sector, electric vehicles are a major consumer of various strategic metals. Lithium is an indispensable core element in all current mainstream power battery chemistries.¹² Cobalt and nickel are key components of the cathode materials for high-energy-density ternary lithium batteries (NMC/NCA).¹³ Meanwhile, high-performance rare earth permanent magnets (especially NdFeB magnets) used in drive motors consume large quantities of neodymium, praseodymium, dysprosium, and other rare earth elements.⁴ It is worth noting that the evolution of battery technology can affect the demand for specific metals; for example, the rise of lithium iron phosphate (LFP) batteries has reduced the reliance on cobalt and nickel, but the demand for lithium remains strong.⁶ It is projected that by 2025, the new energy vehicle sector alone will drive demand for millions of tons of lithium carbonate.⁴

• Wind Power and Energy Efficiency: In the renewable energy sector, especially for large direct-drive offshore wind turbines, the core components rely on small, powerful NdFeB permanent magnets to achieve efficient energy conversion.⁴ Furthermore, the promotion of high-energy-efficiency equipment in industrial and residential sectors (such as inverter air conditioners and energy-saving elevators) also requires the use of high-performance rare earth magnets.¹² According to Frost & Sullivan, the global consumption of high-performance NdFeB magnets is expected to grow from 66,000 tons in 2020 to 130,000 tons in 2025, with a compound annual growth rate of 14.4%.⁴ By 2025, the combined demand from new energy vehicles, wind power, and inverter air conditioners is expected to account for nearly 60% of the total consumption of high-performance NdFeB (up from 48.8% in 2020), becoming the core driver of the rare earth permanent magnet market’s growth.⁴

2.2 Digitalization and Defense Needs: The Invisible Pillars

Parallel to the green energy revolution is another major trend: the deep digitalization of the global economy and the defense modernization driven by escalating geopolitical competition. This trend also relies on the unique properties of strategic metals.

• Semiconductor Industry: While silicon is the cornerstone of the semiconductor industry, in demanding applications requiring high frequency, high power, high temperature, and radiation resistance, compound semiconductor materials represented by gallium and germanium have irreplaceable advantages. Gallium arsenide (GaAs) and gallium nitride (GaN) chips have much higher electron mobility than silicon, making them core components for 5G/6G communications, artificial intelligence (AI) computing, data centers, EV power management, and advanced radar systems.¹³ Indium plays a key role in indium phosphide (InP) optical communication chips and indium gallium zinc oxide (IGZO) flat-panel display technology.¹³ These advanced semiconductors are the foundation of the modern digital economy and military technology.

• Aerospace and Defense Industries: In these fields, the performance advantages of strategic metals are often irreplaceable. Gallium nitride (GaN) is a key material for satellite power systems and electronic warfare equipment due to its radiation-resistant properties.¹⁵ Rare earth elements are widely used in the sensors of precision-guided weapons, missile guidance systems, night vision equipment, and the gyroscopes of fighter jets.¹⁹ Lithium, with its extremely high energy density, is the preferred choice for lightweight, long-endurance power sources in military equipment such as spacecraft, drones, and soldier combat systems.¹⁵ The “inelastic demand” characteristic of these applications provides a stable source of demand for the strategic metals market, independent of consumer economic cycles.

This duality of demand drivers is a core pillar of this report’s investment thesis. Even if one area (such as the consumer-driven EV market) experiences a short-term slowdown due to macroeconomic factors (like high interest rates), strong demand from another area (such as government and corporate capital expenditure-driven AI data center construction or defense procurement) can provide an effective hedge. Therefore, investing in a diversified portfolio of various strategic metals is equivalent to betting on both of the global economy’s long-term structural transformations, thereby reducing over-reliance on the fortunes of a single end market.

2.3 Downstream Giants: Analyzing Corporate Dependencies

Connecting the macro demand for metals with the concrete realities of corporations makes the investment case more tangible. The world’s most influential technology and industrial giants have business models and future growth that are deeply dependent on a stable and affordable supply of strategic metals.

• Automotive and Battery Industries: Tesla was heavily reliant on rare earth permanent magnet motors in its early development. Although it announced in 2023 that its next-generation motor would be rare-earth-free, this itself reflects a major strategic adjustment to address supply chain risks.¹⁹ The core business of battery giants like CATL and LG Energy Solution is to procure vast quantities of raw materials such as lithium, cobalt, and nickel and convert them into battery products.²¹ As the world’s largest supplier of EV batteries, CATL holds a market share of about 37%-40%, and its procurement strategy has a significant impact on the global battery metals market.⁶

• Technology and Electronics Industries: Apple’s flagship product, the iPhone, uses at least nine different rare earth elements in components like the vibration motor, speakers, and camera.¹⁹ Semiconductor industry leaders like Intel and TSMC, while not directly purchasing minerals, rely on specialty chemicals, gases, and targets made from materials like gallium, germanium, and indium for their complex manufacturing processes. These metals are fundamental to achieving their advanced process technologies.

Chapter 3: The Global Supply Chain: A Geopolitical Chessboard

The investment value of strategic metals is not only determined by their demand but is more profoundly shaped by the structure of their global supply chain. This supply chain is not an ideal, freely competitive market but a complex chessboard shaped by geographical resource endowments, national industrial policies, and geopolitical maneuvering.

3.1 From Mine to Magnet: Deconstructing the Value Chain

The strategic metals value chain consists of three main stages, each with a distinct geographical distribution and market concentration:

• Upstream (Mining and Ore Concentration): This stage is constrained by the geographical distribution of natural resources. Major global mineral resources are highly concentrated in a few countries. For example, lithium ore primarily comes from hard rock mines in Australia and brine lakes in Chile; cobalt production is highly concentrated in the Democratic Republic of Congo (DRC); and the mining of rare earth ores is dominated by China.¹²

• Midstream (Smelting, Separation, and Purification): This is the most critical “choke point” in the entire value chain. It transforms low-grade raw ore or concentrate into high-purity metals, oxides, or salts through complex chemical and physical processes. This stage has high technological barriers, requires large capital investment, and often involves significant environmental costs.

• Downstream (Materials Manufacturing and Application): This stage uses the purified materials from the midstream to manufacture final functional products, such as permanent magnets, battery cathode materials, and semiconductor wafers, which are then integrated into various end-use devices.

3.2 The Dragon’s Grip: China’s Dominance in Midstream Processing

For investors in strategic metals, understanding China’s position in the global supply chain is crucial. Through long-term industrial policy support and technological accumulation, China has established a near-monopolistic global dominance in the technology-intensive, high-value-added midstream processing stage. This has created a unique “decoupled” global supply chain: minerals are mined worldwide, but the vast majority must be shipped to China for refining before being supplied to downstream manufacturers globally.⁴

• Rare Earths: China’s rare earth mine production accounts for about 83% of the global total, but its smelting and separation output accounts for nearly 90% of the world’s share. This means that even rare earth concentrates mined in the United States and Australia are mostly sent to China for processing.¹²

• Lithium: China’s lithium mine production is only 13% of the global total, but its lithium compound smelting capacity accounts for 45% of the world’s total.¹²

• Cobalt: Over 70% of the world’s cobalt is mined in the DRC, but the vast majority of this ore is shipped to China for refining by Chinese companies. China’s share of global cobalt refining output exceeds 60%.¹²

• Gallium and Germanium: In the realm of these dispersed metals, China’s control is even more absolute. China’s production of metallic gallium accounts for 98% of the global total, and its germanium production accounts for nearly 70% of global supply.²⁵ In 2023, China imposed export controls on gallium and germanium-related items, which was widely interpreted by the market as a countermeasure to Western restrictions on semiconductor technology. This clearly demonstrated China’s willingness and ability to use its midstream advantage as a geopolitical lever.¹⁷

This highly concentrated structure is the most significant source of risk for strategic metals investment, but it also creates new investment opportunities.

3.3 Emerging Competitors and Western Diversification Efforts

Faced with China’s dominance in the strategic metals supply chain, Western countries, led by the United States, have identified it as a major threat to their economic and national security. They have begun to take active measures to establish a “second” or “alternative” supply chain independent of China. This global supply chain restructuring will be the core dynamic shaping the industry over the next decade.⁴

• Policy-Driven Initiatives: The United States, through the Inflation Reduction Act (IRA), and the European Union, with its Critical Raw Materials Act (CRMA), have launched a series of major policies. These provide financial subsidies, tax incentives, and demand-side stimuli to strongly support mining and midstream processing projects in their own countries and allied nations.²⁷

• Corporate Actions: With policy support, a group of non-Chinese companies is becoming the central pillar of the West’s supply chain diversification strategy. Australia’s Lynas Rare Earths is currently the world’s largest producer of separated rare earth products outside of China. The American company MP Materials operates North America’s only active rare earth mine, the Mountain Pass mine, and is building downstream separation and magnet manufacturing facilities domestically.⁴ The development paths of these companies are highly aligned with the strategic goals of the West, giving them unique growth potential.

• International Cooperation: Western countries are actively strengthening cooperation with resource-rich and politically aligned nations such as Australia, Canada, Vietnam, and Brazil to jointly develop new mineral resources and processing capabilities, aiming to diversify supply sources globally.⁴

The following table clearly shows the concentration of some key strategic metals in the global supply chain and assesses their vulnerability.

Table 3.1: Global Supply Chain Concentration Analysis of Key Strategic Metals

Metal	Major Mining Countries (% Global Share)	Major Refining Countries (% Global Share)	Key End-Use Applications	Supply Chain Vulnerability Score
Lithium	Australia, Chile, China	China (45%), Chile, Argentina	EV batteries, energy storage systems, consumer electronics	Medium
Cobalt	DRC (>70%)	China (>60%), Finland	EV batteries, high-performance alloys, aerospace	High
Neodymium/Praseodymium (Nd/Pr)	China (~83%), USA, Australia	China (~90%)	Permanent magnets (EV motors, wind turbines)	Very High
Gallium	China	China (>98%)	Compound semiconductors (5G, radar), LEDs	Very High
Germanium	China	China (~70%), Belgium, Germany	Fiber optics, infrared optics, semiconductors	High
Indium	China, South Korea, Japan	China	Flat-panel displays (ITO films), semiconductors	High

Data Sources: ¹²

This table reveals a critical structural problem: even if the sources of upstream minerals can be somewhat diversified (as with lithium and cobalt), the midstream refining bottleneck remains firmly in China’s hands. For dispersed metals like gallium and germanium, the entire process from mining to refining is almost completely monopolized by China. This structure means that any decision to invest in a non-Chinese supply chain must carefully assess the feasibility and timeline of breaking through the midstream bottleneck. This also explains why companies like MP Materials and Lynas, which are committed to building a complete “mine-to-magnet” industrial chain, hold such significant strategic value.

Chapter 4: The Investment Thesis: Balancing a Generational Opportunity with Significant Risks

Based on the preceding analysis of demand, supply, and the geopolitical landscape, this chapter will construct a comprehensive investment thesis, systematically evaluating the investment attractiveness of the strategic metals sector and objectively revealing its inherent major risks.

4.1 The Bull Case: A Long-Term Supercycle

The core bullish logic for the strategic metals sector is that a structurally growing, long-term demand with low price elasticity is facing a supply side with constrained growth, geopolitical complexity, and extremely low elasticity. This fundamental supply-demand imbalance is highly likely to trigger a multi-year price upswing “supercycle”.²⁷

1. Irreversible Structural Demand: The global transition to green energy and a digital economy is an irreversible grand narrative. Over the coming decades, hundreds of millions of electric vehicles, tens of thousands of wind turbines, and a massive number of smart devices and data centers will be manufactured, continuously consuming vast quantities of strategic metals.

2. Supply Bottlenecks Difficult to Alleviate in the Short Term: The exploration, permitting, financing, and construction cycle for new mines is extremely long, typically taking 5 to 10 years or even longer. Midstream smelting and separation facilities are technology- and capital-intensive projects, facing strict environmental regulations. This means that even if prices soar, the supply-side response will have a significant lag. The World Bank’s forecast supports this view, suggesting that in the long run, the demand growth from clean energy systems, electronics, and advanced military technologies will outpace supply growth.²⁷

3. Geopolitical Premium: As great power competition intensifies, supply chain security has become a core national strategy. The massive investments made by Western countries to break their dependence on a single source of supply, along with policy changes in resource-rich countries, will increase the global cost of accessing these resources. This “security premium” and “geopolitical premium” may be factored into the long-term price of the metals, providing a floor for the price level.

4.2 The Bear Case: A Minefield of Volatility, Geopolitics, and Disruption

Any investment area with huge potential is inevitably accompanied by correspondingly huge risks. For strategic metals, these risks are also structural, and investors must have a clear understanding of them.

4.2.1 Resource Nationalism and Policy Risk

This is currently the most prominent and direct risk in the sector. Countries with critical mineral resources, especially developing nations, are increasingly inclined to assert greater control over their domestic resources through policy interventions and to seek higher returns in the value chain. This trend is known as “resource nationalism.” Recent examples include:

• Chile announced it would nationalize its lithium industry, requiring private companies to partner with a state-controlled entity to develop new projects. This directly affects the long-term operational prospects of global lithium giants Albemarle and SQM.¹⁴

• Indonesia has banned the export of unprocessed nickel ore since 2020, forcing foreign companies to build smelters locally. This move has successfully transformed Indonesia from a mere resource exporter into a global processing hub for stainless steel and battery materials.¹⁴

• The Democratic Republic of Congo (DRC) amended its mining law in 2018, doubling the state’s non-contributory share in mining projects and imposing higher royalties on “strategic minerals” like cobalt.¹⁴

While these policies aim to achieve the economic development goals of the resource-rich countries, for investors, they create enormous uncertainty. They can lead to soaring project costs, contract renegotiations, or even asset expropriation, severely impacting the profitability and stock performance of mining companies.⁴

4.2.2 Extreme Price Volatility

The prices of strategic metals have historically been known for their extreme volatility. This volatility stems from their inelastic supply, concentrated demand, and high sensitivity to geopolitical and policy news.⁴ Around 2011, due to China tightening its rare earth export quotas, rare earth prices skyrocketed nearly tenfold in a short period, only to plummet later due to demand collapse and the development of alternative technologies, causing heavy losses for investors who chased the highs. In recent years, the prices of lithium and cobalt have experienced similar roller-coaster rides, soaring on high demand expectations and then falling sharply on concerns of oversupply and weaker-than-expected demand.¹⁴ This high volatility places extremely high demands on investors’ risk management capabilities.

4.2.3 The Threat of Technological Substitution and Thrifting

High prices and unstable supply are the strongest catalysts for technological innovation. Downstream application companies and research institutions have been continuously working to reduce their dependence on expensive and supply-constrained strategic metals in two ways:

• Substitution: Finding alternative materials with similar performance but lower cost and more secure supply. The most notable example of this is Tesla’s announcement that its next-generation permanent magnet motor will be completely free of rare earth elements.²⁰ If this technology can be successfully commercialized and widely adopted by the industry, it would pose a disruptive threat to the long-term demand for heavy rare earths like neodymium, praseodymium, and dysprosium.

• Thrifting: On the existing technological path, continuously reducing the amount of critical materials used per unit of product through process improvements. For example, in the development of ternary lithium battery technology, the industry trend has been “high nickel, low cobalt,” which means increasing the proportion of nickel to enhance energy density while significantly reducing the use of expensive and high-supply-risk cobalt.

Technological substitution and thrifting are dynamic and ongoing processes that create a potential ceiling for the long-term demand growth of strategic metals. Investors must continuously monitor technological advancements in related fields to assess their potential impact on their investment portfolios.⁴

However, a deeper logic is that the aforementioned bear case (risks) is precisely the catalyst for the next round of bullish opportunities. It is because of China’s dominance and the policy risks in resource-rich countries that Western governments and companies are determined to invest billions of dollars to build alternative supply chains. This opens up a new investment path for investors: not just betting on the commodity prices themselves, but investing in the reshaping of the geopolitical landscape. The huge subsidies provided by policies like the U.S. Inflation Reduction Act essentially provide government endorsement for companies committed to building new mines and refineries in the Western world (such as MP Materials), reducing their significant upfront capital expenditure risks. Therefore, investing in these “supply chain champions” is essentially investing in a long-term industrial trend driven by national will to achieve supply chain security. The driving force behind this investment transcends mere commodity cycles and enters the grander realm of geoeconomics and industrial strategy.

Chapter 5: A Practical Guide for Secondary Market Investors

For ordinary investors wishing to participate in strategic metals investments, the secondary market offers several avenues, primarily including direct investment in related company stocks and diversified allocation through exchange-traded funds (ETFs). This chapter will provide specific, actionable analysis of investment targets and strategic recommendations.

5.1 Strategy One: Direct Holdings in Global Producers

Directly investing in the stocks of listed companies allows investors to more precisely express their views on specific metals, regions, or segments of the value chain. The following is a classification of major listed companies according to their strategic positioning.

5.1.1 Chinese Market Leaders

For investors who can access China’s A-share or Hong Kong stock markets and have a higher risk tolerance, directly investing in Chinese industry leaders is the most direct way to share in China’s dominance in this field. These companies are typically large, have complete industrial chains, and are technologically advanced.

• Rare Earths: China Northern Rare Earth (600111.SS) is one of the world’s largest suppliers of rare earth products, controlling the light rare earth resources in northern China. Shenghe Resources (600392.SS) is a global producer of rare earths and zirconium-titanium minerals.³⁴

• Lithium: Ganfeng Lithium (002460.SZ) and Tianqi Lithium (002466.SZ) are two giants in the global lithium industry, with high-quality lithium resources (including mines and salt lakes) worldwide and strong lithium compound processing capabilities.³⁴

• Cobalt: Huayou Cobalt (603799.SS) is a leading global supplier of cobalt products, with a deep presence in the cobalt resources of the DRC and domestic refining and battery material manufacturing.³⁴

• Tungsten/Molybdenum: Xiamen Tungsten (600549.SS) and Jinmo Co., Ltd. (601958.SS) are the leading companies in China’s tungsten and molybdenum industries, respectively.³⁴

5.1.2 International Champions and Diversification Plays

For most international investors, investing in non-Chinese industry leaders is the core way to participate in the “supply chain restructuring” theme. These companies are the key executors of the Western strategy to build an independent and autonomous supply chain.

• Rare Earths:

  • MP Materials (MP.N): Operates the only rare earth mine and processing facility in North America, making it a core enterprise in the U.S. “rare earth independence” strategy, strongly supported by government agencies like the Department of Defense.²⁸

  • Lynas Rare Earths (LYC.AX): The world’s largest producer of separated rare earth products outside of China, with high-grade mines in Australia and processing plants in Malaysia and the United States. It is the preferred partner for downstream users in Europe and the U.S. seeking supply diversification.²⁹

• Lithium:

  • Albemarle (ALB.N): One of the world’s largest lithium producers, with operations in Chile, Australia, and the United States, and a product line covering lithium carbonate, lithium hydroxide, etc..³⁵

  • Sociedad Química y Minera de Chile (SQM.N): A Chilean lithium giant, primarily extracting lithium from the Atacama Salt Flat, with a significant cost advantage but facing uncertainty from Chile’s lithium nationalization policy.³⁵

  • Pilbara Minerals (PLS.AX): A major Australian hard-rock lithium producer, benefiting from strong global demand for lithium concentrate.³⁵

• Cobalt:

  • Glencore (GLEN.L): One of the world’s largest cobalt producers. Its mines in the DRC are a major source of global cobalt supply, but the company also faces high geopolitical and ESG risks.³⁹

• Dispersed Metals:

  • Since dispersed metals are mostly by-products, pure-play listed companies are extremely rare. Investors usually need to gain exposure indirectly by investing in primary metal producers. For example, Chihong Zinc & Germanium (600497.SS) is a leading lead-zinc producer in China and also one of the world’s major germanium producers, with its germanium capacity accounting for about one-third of the global total.⁴⁰

The following table summarizes some of the core listed companies to help investors make a quick comparison.

Table 5.1: Overview of Selected Key Strategic Metals Listed Companies

Company	Ticker (Exchange)	Primary Metals	Value Chain Position	Geographic Footprint	Strategic Rationale for Investment
China Northern Rare Earth	600111.SS (SSE)	Rare Earths (Light)	Upstream, Midstream	China	Invest in China’s dominant position in the global rare earths sector
MP Materials	MP.N (NYSE)	Rare Earths	Upstream, Midstream	USA	Beneficiary of U.S. government-supported domestic supply chain construction
Lynas Rare Earths	LYC.AX (ASX)	Rare Earths	Upstream, Midstream	Australia, Malaysia, USA	Invest in the core enterprise of the “non-Chinese” rare earth supply chain
Albemarle	ALB.N (NYSE)	Lithium	Upstream, Midstream	Global	A global leader in the lithium industry with diversified operations
SQM	SQM.N (NYSE)	Lithium	Upstream, Midstream	Chile	Low-cost brine lithium giant, but with high policy risk
Ganfeng Lithium	002460.SZ (SZSE)	Lithium	Upstream, Midstream	Global	A leading Chinese lithium company with a high degree of vertical integration
Glencore	GLEN.L (LSE)	Cobalt, Copper, Nickel	Upstream, Midstream	Global	A global commodities giant and a major player in the cobalt market

5.2 Strategy Two: Diversified Exposure Through ETFs

For most investors who do not wish to take on single-company risk, ETFs offer a convenient, low-cost, and effective way to diversify risk.

5.2.1 The Core Choice: VanEck Rare Earth/Strategic Metals ETF (REMX)

The VanEck Rare Earth/Strategic Metals ETF (REMX.O) is the most direct and liquid ETF for investing in this sector globally.

• Holdings Analysis: A deep analysis of REMX’s holdings is crucial. As of 2025, its top ten holdings include both Chinese industry giants like China Northern Rare Earth (approx. 11% weight) and Shenghe Resources, as well as key international players like MP Materials (approx. 11% weight), Lynas (approx. 7% weight), and lithium giants Albemarle and Pilbara Minerals.³⁵ This holding structure reveals a key point: even the most commonly used “Western” ETF cannot completely avoid dependence on the Chinese industrial chain. Investing in REMX is, to some extent, investing in a global portfolio that includes top companies from both China and the United States.

• Geographic and Sector Distribution: In terms of country distribution, China has the highest weighting in REMX’s portfolio (about 32%), followed by the United States (about 24%) and Australia (about 21%).⁴² By sector, the vast majority of its assets (over 99%) are invested in the materials industry.⁴²

5.2.2 Alternative and Supplementary ETFs

Besides REMX, investors can consider other ETFs to build a portfolio that better suits their investment preferences.

• Global X Lithium & Battery Tech ETF (LIT.K): This ETF is more focused on the complete lithium value chain, including not only upstream lithium mining companies but also a large holding of midstream battery manufacturers like CATL. For investors who want to concentrate more on the battery and electric vehicle theme, LIT can be a strong supplement to REMX.³⁸

• iShares MSCI Global Metals & Mining Producers ETF (PICK.K): This is a broader and more conservative choice. It invests in a wide range of metals and mining companies globally, including iron ore giants like BHP and Rio Tinto. Its portfolio also includes some strategic metals producers, but the overall risk and expected return are lower than the highly concentrated REMX. It is suitable for investors who want to make a moderate investment in the entire mining cycle.²⁹

5.3 Risk Management and Portfolio Allocation Recommendations

Given the inherent high volatility of the strategic metals industry, it is recommended that investors treat investments in this sector as a strategic component of their overall portfolio, rather than their entire portfolio. The allocation percentage should be determined based on individual risk tolerance and investment horizon, and it should generally not be too high.

An effective strategy is to adopt a “core-satellite“ model:

• Core Allocation: Use a diversified ETF like REMX or PICK as the core part of the investment portfolio. This helps capture the long-term growth trend of the entire industry while reducing non-systemic risk through diversification.

• Satellite Allocation: On top of the core allocation, use a small amount of capital to selectively invest in individual company stocks to express more specific investment views. For example, if an investor strongly believes that the United States will successfully build a domestic rare earth supply chain, they could allocate a small portion of their position to MP Materials. If they are bullish on the long-term trend of lithium prices, they could allocate to Albemarle or Ganfeng Lithium. This strategy allows for the pursuit of excess returns while controlling overall risk.

Chapter 6: Concluding Analysis and Strategic Outlook

6.1 Final Verdict on the Investment Opportunity

Based on the comprehensive analysis in this report, the strategic metals sector offers a compelling but challenging long-term investment opportunity for investors with a long-term vision and a higher risk tolerance. The structural forces driving its demand—global decarbonization and digitalization—are real, powerful, and will persist for decades to come. This certainty of demand growth, combined with the rigidity of the supply side and the complexity of geopolitics, forms the core basis of the sector’s long-term investment value.

The final conclusion is that the industry is worth investing in, but it is not a “hot trend” for easy profits. It is more like a “marathon” that requires patience, foresight, and a deep understanding of the global macroeconomic landscape. Investors should not expect short-term windfalls but should view it as a strategic positioning for the future economic landscape and the shifting global balance of power. The key to successful investment lies in maintaining composure amidst sharp price volatility and accurately identifying the companies that can navigate the cycles and ultimately emerge as winners in the global supply chain restructuring.

6.2 Long-Term Outlook: Key Signposts for Investors to Watch

Investing in the strategic metals sector is a dynamic process, and investors need to continuously track a series of key variables that could affect the industry’s fundamentals. The following are the core “signposts” to watch closely in the coming years:

1. Geopolitical Tensions: Pay close attention to changes in U.S.-China relations, especially any new export controls, tariffs, or technology barriers that may emerge. These events will directly impact the stability of the global supply chain and the profit expectations of related companies.

2. Resource Nationalism Policies: Continuously track the domestic policy developments in major resource-rich countries (such as Chile, the DRC, Indonesia, Mexico, etc.). Any major adjustments to taxation, nationalization, export restrictions, or environmental regulations could have a profound impact on the global supply landscape and the operations of mining companies.

3. Technological Breakthroughs: Focus on the evolution of battery chemistry and motor technology. The commercialization process of new technologies like sodium-ion batteries and solid-state batteries, as well as the progress of leading companies like Tesla in “rare-earth-free” motors, could change the demand curve for specific metals in the future.

4. Progress in Western Supply Chain Construction: Track the construction progress, capacity ramp-up, and final product cost competitiveness of new mines and refineries built by non-Chinese companies like MP Materials and Lynas. At the same time, monitor the implementation of financial support and policy backing for these projects from governments in the U.S., EU, and elsewhere.

5. Demand Data in Key Sectors: Regularly review global electric vehicle sales data, penetration rate changes, and the capital expenditure plans of major semiconductor manufacturers. These are the most direct indicators for verifying whether the long-term demand logic is being realized.

By continuously monitoring these key variables, investors will be better able to navigate the turbulent waters of the strategic metals market and seize the extraordinary investment opportunity created by this era of change.

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