CME Group plans to launch the world's first rare earth futures contract

Investing.com – According to Reuters, citing sources familiar with the matter, CME Group is developing the world’s first rare earth futures contract, focusing on NdPr (Neodymium and Praseodymium).

This planned contract will allow governments, companies, and banks to hedge risks in the currently China-dominated rare earth sector. Two sources revealed that Intercontinental Exchange is also exploring rare earth futures, but its plans are not as advanced as CME’s.

Rare earth elements include 17 elements that are critical for energy transition, electronics, and defense industries. The CME contract’s focus on NdPr is particularly important because they are used to manufacture permanent magnets for electric vehicle motors, wind turbines, fighter jets, and drones.

“This is a key missing piece in the current industry puzzle,” one source said.

No final decision has been made regarding the launch of this contract. A major challenge is the relatively small trading volume of rare earths, which results in a much smaller market size compared to other metal futures.

Rare earths are becoming increasingly important as Western efforts to boost critical mineral production intensify. The U.S. recently established a preferential trade group with allies and launched a strategic reserve valued at $12 billion.

Currently, NdPr prices are determined in China and reflected in indices from price reporting agencies such as Fastmarkets, Benchmark Mineral Intelligence, and the Shanghai Metal Market. China has two rare earth spot trading exchanges—the Ganzhou Rare Metals Exchange and the Baotou Rare Earth Products Exchange. The Guangzhou Futures Exchange has also announced plans to offer rare earth futures.

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