The global competition for critical minerals has intensified significantly as nations recognize their strategic importance for economic security and technological advancement. China's expansion of export controls on rare earth materials and related technologies, citing national security concerns, highlighted the vulnerability of global supply chains and prompted urgent responses from developed nations.
This realization that China maintains dominant control over essential inputs has accelerated international efforts to secure alternative supplies. The United States and Australia recently signed a critical minerals framework agreement after five months of talks, representing a significant step toward energy and mineral leadership goals for both countries. This agreement seeks to accelerate development of robust, allied mineral supply chains and reduce dependence on rival nations.
The G7 nations have announced a critical minerals production alliance, with Canada recently announcing the first round of investments. The United States has also taken assertive measures through a public-private partnership with MP Materials Corp., a company that produces and markets rare-earth specialty materials. Through this strategic investment, the U.S. government, via the Department of Defense, will hold a 15% ownership stake in the company.
Resource nationalism and supply-chain security are becoming major themes across the global economic landscape as demand for critical minerals grows. The U.S., European Union, and Japan have all passed or proposed critical minerals strategies to reduce dependence on China for rare earths, graphite, manganese, and other strategic inputs. These policies often involve subsidies, domestic mining incentives, and stockpiling measures that can support companies involved in critical minerals exploration, refinement, and distribution.
While energy development and storage represents a prominent use case for critical minerals, governments are particularly concerned with securing supply chains for defense, aerospace, and advanced manufacturing applications. Rare earths such as neodymium, dysprosium, and praseodymium are essential for jet engines, missiles, radar systems, and precision optics beyond their use in electric vehicle motors.
For investors seeking exposure to this growing sector, the Sprott Energy Transition Materials ETF (NASDAQ: SETM) offers diversified exposure to companies involved with uranium, lithium, copper, rare earths, and other critical materials. Rather than focusing on single commodities or companies, SETM provides broad market exposure that can help mitigate single-commodity risk while capturing opportunities across the critical materials sector.
SETM gives investors equity exposure to upstream miners, explorers, developers, and refiners of materials deemed critical for the energy transition. The fund seeks to provide investment results corresponding generally to the total return performance of the Nasdaq Sprott Critical Materials Index, which tracks global securities in the critical materials industry. Given potential supply constraints due to long lead times for new mining operations or geopolitical interventions, companies involved in critical minerals production could benefit from upward price pressure in coming years.
