How to Invest in Rare Earths in 2025: Neodymium, Permanent Magnets and UK ETF Options

You are not bullish enough on magnets – what the Reddit thesis gets right (and wrong)

The Reddit post “You are not bullish enough on magnets” argues that neodymium-based permanent magnets will see surging demand from robots, drones, defence, electric vehicles and aerospace.

“Neodymium is the leading option… huge near-term demand from advanced military and transport technology.”

The author also suggests iron-nitride magnets could out-compete neodymium over the long run but not soon, leaving a multi-year window of strong neodymium demand. The core idea is simple: critical-magnet demand is compounding, supply growth is constrained, and the price has rallied but the decade-long opportunity remains.

It’s a punchy thesis. Here’s how it stacks up for UK investors – and practical ways to get exposure via London-listed ETFs and equities.

Neodymium magnets, defence and EVs – demand drivers into 2035

Neodymium-iron-boron (NdFeB) magnets pack a huge amount of magnetic energy per kilogram. That makes them the default choice where weight and efficiency matter: EV traction motors, industrial robotics, drones, precision-guided munitions, aircraft actuators and offshore wind turbine generators.

Three demand pillars to watch:

• EVs and hybrids – Permanent magnet motors are efficiency winners at mass-market price points. Some OEMs are reducing rare-earth intensity, but total units are still growing.
• Energy transition hardware – Direct-drive offshore wind turbines use large quantities of NdFeB magnets; grid-scale industrial drives add further pull.
• Defence and drones – From small UAVs to advanced missiles, high-performance magnets are design-critical and difficult to substitute without penalties.

On balance, the Reddit post is directionally right on demand momentum, though timelines vary by sector and OEM engineering choices.

Supply, refining and geopolitics – why rare earths remain volatile

Rare earths aren’t geologically rare, but their processing is concentrated. China dominates refining and magnet-making capacity, which creates policy and price risk for the rest of the world. Prices can swing violently when quotas, export policies, or inventory cycles shift.

Outside China, supply is growing but from a small base. Producers like Lynas (Australia) and MP Materials (US) are expanding. The UK is seeking to onshore parts of the value chain under its Critical Minerals Strategy, with projects such as alloy-maker Less Common Metals and a proposed magnet materials plant at Saltend.

For investors, this concentration means two things: upside when supply is tight, and painful drawdowns when new capacity arrives or downstream buyers destock. Treat it as a cyclical commodity theme with structural tailwinds, not a one-way trade.

How UK investors can get exposure to rare earths and permanent magnets

UCITS ETFs on the London Stock Exchange

• VanEck Rare Earth and Strategic Metals UCITS ETF – A diversified basket of global rare earth and strategic metal miners and processors. See provider page: VanEck REMX UCITS.
• Sprott Energy Transition Materials UCITS ETF (via HANetf) – Broader energy‑transition materials exposure (copper, nickel, lithium, cobalt and others) with some indirect rare-earth exposure through constituents. Provider: HANetf SETM.

The VanEck fund is the closest LSE-listed “pure play” for rare earths, but do check the current holdings, costs and currency lines on your platform. These are equity ETFs – they do not track spot neodymium or NdPr prices.

London-listed rare earth developers and processors

• Pensana (LSE: PRE) – Developing the Longonjo project in Angola and a processing facility at Saltend (UK). Pre‑production; financing and execution risks apply.
• Rainbow Rare Earths (LSE: RBW) – Focused on high-grade gypsum stacks (South Africa) and Gakara (Burundi). Early-stage processing strategy; subject to project delivery.
• Mkango Resources (AIM: MKA) – Malawi project and magnet-recycling interests via HyProMag UK.

Single-asset developers can offer torque to prices but come with higher risk: permitting, capex inflation, technology scale-up and dilution. Diversification matters.

Indirect routes: EVs, wind and defence

• EV and powertrain suppliers – Some will benefit from magnet-efficient designs, others may shift to induction or switched reluctance motors. OEM choices can dilute pure rare-earth sensitivity.
• Offshore wind OEMs – Magnet use is material in direct-drive designs, though project cyclicality and policy risk can dominate equity performance.
• UK defence primes – Demand for high-performance components is supportive, but rare-earth prices are only one of many earnings drivers.

Iron‑nitride magnets – promising, but not a near‑term replacement

The Reddit post highlights iron‑nitride as a future challenger. Fe16N2-based magnets have long been a research focus thanks to potentially high magnetisation and better sustainability. The challenge is achieving stable, scalable manufacturing that matches NdFeB across temperature, coercivity and cost at volume.

In other words, keep iron‑nitride on the watchlist for the 2030s. For the second half of the 2020s, NdFeB remains the benchmark for most high-performance applications, with engineering efforts focused on reducing heavy rare earth content and recycling.

Key risks, sizing and time horizon

• Commodity cyclicality – NdPr prices are volatile. Expect sharp drawdowns alongside strong rallies.
• Policy and trade – Export controls, tariffs and subsidy shifts can reroute supply chains quickly.
• Technology substitution – OEMs can redesign around cost spikes, adopting alternative motor topologies or magnet chemistries.
• Project execution – For developers, delays and capex overruns are common in complex materials projects. See my note on long-cycle project risk in energy here.
• FX and liquidity – Many miners are non-UK listings held via UCITS funds; currency moves and fund liquidity matter.

Position sizing should reflect these risks. A diversified ETF allocation is a simpler starting point than concentrated single-stock bets, and a multi‑year horizon is usually required.

Bottom line: a credible long-term theme, with near-term noise

The Reddit thesis captures the structural case: magnets are mission‑critical to EVs, wind, robotics and defence, and the supply chain is not yet redundant or diversified enough to dull that impact. Prices will not move in a straight line, but scarcity premiums can persist in bottlenecked materials.

For UK investors, the practical routes are an LSE‑listed UCITS ETF for diversified exposure, complemented by selective positions in London‑listed developers if you can tolerate project risk. Keep an eye on UK processing moves and magnet recycling – that’s where the value chain is being rebuilt.

This article is for information only and is not investment advice. Always do your own research and consider professional advice before investing.