Neodymium and Praseodymium (NdPr) prices have surged 40% in 2026, hitting levels not seen since July 2022. But without a hedging mechanism, most Western rare earth projects still can't get financed - and China still sets the price. CME Group is trying to change that - but will it work?
The Chicago-based derivatives giant is developing the first exchange-traded futures contract for NdPr, the two elements used in permanent magnets that power wind turbines, EV drivetrains, drones and fighter jets.
Reuters reported the plans last week, citing three sources familiar with the matter, adding that rival Intercontinental Exchange is also sniffing around the space but is well behind.
"It's such a key missing piece of the puzzle for the industry right now," one source close to the planning told Reuters.
Washington spent the first week of February rolling out a 54-country Critical Minerals Ministerial - a US$12 billion strategic stockpile under Project Vault, JD Vance's pitch for an allied critical minerals trading bloc, and more than $30 billion in government-backed financing commitments over the past six months.
Why banks won't touch rare earths
Without futures, miners can't hedge revenue, lenders can't model downside risk, and projects don't get off the ground.
China controls roughly 90% of global rare earth processing and dictates pricing through the Ganzhou Rare Metal Exchange and Baotou Rare Earth Products Exchange.
NdPr is typically shifted through bilateral deals and pegged to Chinese indices from agencies such as Fastmarkets and Shanghai Metals Market.
The 40% NdPr rally so far this year follows a 50% decline over the 15 months to May 2023 - and that kind of volatility is exactly what keeps project financiers at arm's length.
Last July, the Department of Defense struck a multibillion-dollar deal with MP Materials, underwriting a $110/kg floor for NdPr oxide - nearly double the then-Chinese spot rate of around $60/kg.
The Pentagon took a 15% equity stake in MP Materials and locked in a 10-year offtake agreement for its planned magnet production facility.
"This benchmark is now a new centre of gravity in the industry that will pull prices up," Adamas Intelligence managing director Ryan Castilloux said at the time.
But one-off government backstops don't scale, and a listed futures contract would do the same job through open-market mechanics - handing every producer, not just those with Pentagon support, a tool to lock in offtake and chase down project finance.
The race to set the price
CME already runs contracts for lithium and cobalt, both of which gained traction despite early scepticism about thin turnover in niche commodity markets.
Rare earths are a harder nut to crack, given the market is shallow, opaque and dominated by a single country that controls the refining chain end to end.
Benchmark Mineral Intelligence has started publishing European and North American rare earth assessments, but turnover remains patchy compared to China's established spot exchanges.
The Guangzhou Futures Exchange has also signalled plans to launch its own rare earth derivatives, teeing up a tug-of-war over who anchors the global reference point.
Then there's whether commercial offtakers will follow the trajectory that government-backed deals have laid down.
Project Blue's David Merriman raised that doubt last year, noting that private-sector buyers don't operate like defence departments.
"Major non-government backed consumers are less likely to follow this same investment pattern, however, as they are not so clearly aligned to a particular regional supply route," Merriman said.
A CME-listed NdPr contract would give EV makers, turbine manufacturers and defence primes a hedging tool they currently lack, while handing developers the forward-revenue visibility that lenders have demanded for over a decade.
What could go wrong?
The pitch for futures rests on one assumption: that they bring stability to a chaotic market. But in a market this small, the opposite can happen.
The NdPr physical market is a fraction of the size of copper, nickel or even lithium - and there is a recent precedent for what thin critical minerals futures look like in practice.
When the Guangzhou Futures Exchange launched lithium carbonate futures in 2023, volumes surged, but the Futures Industry Association noted that prices were "extremely volatile and most of the volume appears to be driven by speculative interest, rather than commercial hedging".
Rare earths would be an even shallower pool, and a contract dominated by speculative capital rather than physical hedgers risks distorting the price signal it was designed to provide.
There is also the geopolitical dimension. A Western benchmark that directly challenges Beijing's pricing grip could accelerate retaliation from a country that has already weaponised rare earth supply four times since 2010 - most recently with sweeping export controls in October 2025 and a ban on dual-use rare earth shipments to Japan in January 2026.
If Beijing reads a CME-listed NdPr contract as another front in the pricing war, the supply squeeze that futures are meant to hedge against could arrive faster than the hedge itself.
