CME is preparing to launch a new futures contract that could help electric vehicle companies and military contractors cope with unusual fluctuations in neodymium and praseodymium prices.
These metals are used together to make magnets that power EV motors, fighter jets, drones, and wind turbines. Currently, there is no good way to protect against sudden price increases, which poses a major problem for companies trying to plan or raise capital.
China controls 90% of the world’s processed rare earths. This dominance has made it difficult for Western countries to get projects off the ground. Banks don’t want to invest in rare earth mining or processing because there’s no way to predict prices and producers can’t guarantee a return.
CME’s idea is to ultimately provide the market with tools to avoid that. Intercontinental Exchange is also considering this area, but is far behind, two sources said.
CME plans futures contract for NdPr magnets
CME wants to create a deal that combines both neodymium and praseodymium. The two are usually sold as a pair and are essential in the production of permanent magnets. These magnets power all kinds of machines, from Tesla cars to military equipment.
“This is an important piece of the puzzle that is currently missing for the industry,” one person close to the situation was quoted as saying.
Plans are still in development. No official decision has been made yet. One problem is that the rare earth market is small and poorly traded. This makes it difficult to build large futures markets. But CME has already had success with lithium and cobalt, which are now being used to hedge battery metals in the EV supply chain.
The timing coincides with larger moves by the U.S. government. Just last week, the United States rolled out a trade alliance focused on critical minerals, adding $12 billion to its mineral stockpile, including rare earths.
Back in July, the Washington government also struck a multibillion-dollar deal with MP Materials, giving the government a 15% stake in the company and setting a price floor based on NdPr.
Market remains volatile as China controls prices
For now, all rare earth prices are still set in China. Fastmarkets, Benchmark Mineral Intelligence, and Shanghai Metals Market indices serve as the basis for NdPr pricing. These prices are never stable.
According to SMM, NdPr prices rose 40% in 2026, reaching their highest level since July 2022. However, it fell by 50% from the beginning of 2022 to May 2023.
China has two rare earth spot exchanges: Ganzhou Rare Metals Exchange and Baotou Rare Earth Products Exchange. Guangzhou Futures Exchange also wants to launch rare earth futures in the future. Benchmark Mineral Intelligence is starting to provide prices for rare earths in Europe and North America, but these markets are still fairly thin.
Outside of China, rare earth mines are stranded. Most companies are unable to raise capital because there is no stable price forecast and no way to hedge their risks.
Futures would solve both problems. Large magnet buyers like EV manufacturers will be able to lock in magnet prices rather than guessing quarterly.
Earlier this month, CME reported that the year ended on a strong note. Daily trading volume rose 7.5% to a record 27.4 million contracts, and fourth-quarter profit exceeded expectations.
If rare earth futures become a reality, they will follow the same path as lithium and cobalt. Although the market is small today, companies will eventually be able to use it to protect themselves from Chinese domination.
