Metals ETFs Gain on Rare Earths, Tariff-Induced Shortages
- XME has gained 29% over the past three months, topping the S&P 500.
- Metals companies are rising as tariffs create shortages.
- XME’s biggest holding, rare-earths producer MP, is rising on US investment.
Exchange-traded funds holding stocks of metals companies have soared over the past three months, in part on speculation that the United States' on-again, off-again tariff regime is creating shortages and thanks to huge investments in the biggest domestic rare-earths company.
The biggest metals exchange-traded fund, the $2.1 billion SPDR S&P Metals & Mining ETF (XME), has jumped 33% over the past three months through July 15, outpacing the S&P 500’s 17% gain as measured by the Vanguard S&P 500 ETF (VOO). It's pulled in $152.9 million over that period.
Metals producers are the fifth-best performing sector among 30 sectors and industries tracked by etf.com’s Markets Monitor over the past three months. Clean energy, as tracked by the Invesco WilderHill Clean Energy ETF (PBW), leads with a 46% three-month gain.
Another surging metals ETF is the $55.9 million Sprott Energy Transition Materials ETF (SETM), adding 33% since mid-April.
XME, SETM Hold Rare-Earths Producer MP Materials
Both XME and SETM’s hold MP Materials Corp. (MP) as their top allocation. MP, owner of the only operating rare-earths mine in the U.S., has more than doubled in the last 90 days thanks to Apple Inc. (AAPL) agreeing to buy $500 million in magnets and the U.S. Defense Dept. agreeing to buy $400 million in preferred stock.
With China as the world’s biggest rare-earths producer, companies and government entities are aiming for a reliable source of the metals amid a U.S./China tariff battle.
Tariffs appear to be limiting global output of metals, as duties have been threatened or imposed on large metals-producing countries, including Canada, Chile and China. According to data from the London Metals Exchange, inventories of copper, aluminum, zinc and tin have plummeted this year through the end of the second quarter.
Top Sector & Industry ETFs
Source: etf.com Markets Monitor & FactSet Data
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“Tariffs on aluminum, steel and copper have lifted U.S. producers of those metals,” etf.com Senior Analyst Sumit Roy said. “Additionally, the big government investment in MP Materials, the United States' only rare-earths producer, has sent shares of that stock surging.”
