ASX ETFs can be a vehicle for broad exposure to global or domestic markets. However, increasingly, there are ASX ETFs that focus on niche markets, sectors, or themes.
Yesterday, markets reacted strongly to a deal struck by Prime Minister Anthony Albanese with US President Donald Trump.
The Motley Fool's Bernd Struben reported the surge for ASX rare earths stocks following a US-Australia deal to bolster rare earths and critical mineral supplies amidst US-China trade tensions.
The deal will give the US greater access to Australia's rare earths and other critical minerals amid growing trade tensions with China.
According to Albanese (quoted by Bloomberg), the deal represents a US$8.5 billion "pipeline that we have ready to go".
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What are rare earths stocks?
Rare earths stocks are companies that explore, mine, or process rare earths elements (REEs) – a group of metals vital for technologies like electric vehicles, wind turbines, smartphones, and military systems.
On the ASX, known rare earths companies include:
- Lynas Rare Earths (ASX: LYC) – Australia's largest rare earths producer, operates the Mount Weld mine (WA) and a refinery in Malaysia, expanding processing in WA.
- Arafura Rare Earths (ASX: ARU) – Developing the Nolans Project (NT), focused on neodymium and praseodymium for EV motors.
- Iluka Resources (ASX: ILU) – Traditionally a mineral sands producer, now building Australia's first integrated rare earths refinery at Eneabba (WA).
- Hastings Technology Metals (ASX: HAS) – Developing the Yangibana Project (WA), rich in NdPr (magnet materials).
- Australian Strategic Materials (ASX: ASM) – Developing the Dubbo Project (NSW), producing rare earths along with zirconium and niobium.
The United States has committed to increasing investment and strategic support for several Australian rare earths and critical minerals companies, as part of its broader effort to reduce dependence on China for the supply of these key materials.
This investment may spark interest for Aussies to gain exposure to this market.
How do investors gain exposure?
Many of these rare earths stocks are penny stocks, trading for under $1. This can lead to volatility and uncertainty regarding long-term success.
For investors seeking lower risk, investing in ASX ETFs that hold exposure to some of these companies, along with blue-chip stocks, can offer greater stability.
While there are no ASX ETFs that focus solely on rare earths, there are two that do include some exposure.
The first is VanEck Australian Resources ETF (ASX: MVR).
MVR gives investors exposure to a diversified portfolio of ASX-listed resources companies.
At the time of writing, there are 31 holdings in the fund, including 2 rare earths companies:
- Lynas Rare Earths Ltd (ASX: LYC) – Approximately 5.8% weighting.
- Iluka Resources Ltd (ASX: ILU) – Approximately 1.18% weighting.
It also holds blue-chip companies like Rio Tinto Ltd (ASX: RIO) and BHP Group Ltd (ASX: BHP).
Another option with a similar profile is SPDR S&P/ASX 200 Resources Fund (ASX: OZR).
It also provides exposure to the resources sector with 49 underlying holdings.
This also includes a 2.8% weighting towards Lynas and a 0.55% weighting towards Iluka.
