CME is developing the world’s first rare earth futures contract so companies can hedge volatile NdPr prices

CME is getting ready to launch a new futures contract that could help electric vehicle companies and military contractors deal with crazy swings in the cost of neodymium and praseodymium.

These metals are used together in magnets that run EV motors, fighter jets, drones, and wind turbines. Right now, there’s no proper way to protect against sudden price jumps, and that’s a huge problem for companies trying to plan or get financing.

China controls 90% of the world’s processed rare earths. That grip has made it hard for Western countries to get projects off the ground. Banks don’t want to invest in rare earth mining or processing because they have no way to predict prices, and producers can’t lock in revenue.

CME’s idea is to give the market a tool to finally hedge against that. The Intercontinental Exchange is also exploring this space, but two sources say it’s way behind.

CME plans futures contract on NdPr magnets

CME wants to create a contract that combines both neodymium and praseodymium. The two are usually sold as a pair and are critical for making permanent magnets. These magnets power all kinds of machines, from Tesla cars to military equipment.

One person close to the situation allegedly said, “It’s such a key missing piece of the puzzle for the industry right now.”

The plan is still in development. No official decision has been made yet. One problem is that rare earth markets are small and not traded much. That makes it hard to build a big futures market. But CME has already pulled it off with lithium and cobalt, which are now used to hedge battery metals in EV supply chains.

The timing lines up with bigger moves from the U.S. government. Just last week, the U.S. rolled out a trade alliance focused on critical minerals and added $12 billion to its mineral stockpile, which includes rare earths.

Back in July, Washington also signed a multi-billion-dollar deal with MP Materials, giving the government a 15% stake in the company and setting a price floor based on NdPr.

China controls pricing and the market stays unstable

At the moment, all rare earth prices are still set in China. Indexes from Fastmarkets, Benchmark Mineral Intelligence, and the Shanghai Metals Market are the standard for setting NdPr prices. Those prices have been anything but stable.

According to SMM, NdPr prices jumped 40% in 2026, hitting the highest level since July 2022. But they also dropped 50% from early 2022 to May 2023.

China has two spot exchanges for rare earths: the Ganzhou Rare Metal Exchange and the Baotou Rare Earth Products Exchange. The Guangzhou Futures Exchange also wants to launch rare earth futures in the future. Benchmark Mineral Intelligence has started showing rare earth prices in Europe and North America, but those markets are still pretty thin.

Outside of China, rare earth mines are stuck. Most can’t get funded because there’s no stable price forecast and no way to hedge risk.

Futures would fix both problems. Big magnet buyers like EV manufacturers would be able to lock in magnet prices instead of guessing every quarter.

Earlier this month, CME reported a strong finish to the year. Daily volume hit a record of 27.4 million contracts, up 7.5%, and fourth-quarter profit beat expectations.

If the rare earth futures go live, they’d follow the same path as lithium and cobalt: a small market today, but one that companies can finally use to protect themselves from China’s grip.

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