Sprott is a Toronto-headquartered asset manager specializing in precious metals and critical materials (NYSE/TSX: SII), tracing its roots to Sprott Securities founded by Eric Sprott in 1981 and now led by CEO Whitney George. It runs physical gold, silver and uranium trusts, ETFs, active strategies and resource lending, with about $65bn in AUM. The Insights column carries monthly commentaries and white papers on uranium, gold, silver, copper and critical materials by Paul Wong, Jacob White and John Hathaway (ex-Tocqueville gold manager) — note the house's structurally bullish commodity stance, as it sells the corresponding trusts and ETFs.
This report explains how critical minerals like rare earths, lithium, and copper have become strategic national-security assets. With China dominating supply, rising defense spending, and clean energy demand, long-term needs are soaring while supply stays tight—possibly starting a new commodity supercycle. Short-term momentum is frothy, so expect pullbacks, but the long-term case is strong. Investors can look into related ETFs, but avoid chasing highs and consider buying in stages.
A Sprott research report indicates that the Nasdaq Sprott Critical Materials Index™ has broken out of a prolonged consolidation range, and technical signals may point to the start of a new upward cycle. Geopolitical factors (tariffs, wars, supply chain vulnerabilities) are elevating critical mineral
This chapter focuses on the transition of critical minerals from niche assets to core strategic commodities. The report argues that geopolitical conflicts, tariff wars, and supply chain vulnerabilities are elevating rare earths, copper, lithium, and other minerals to the core of national security and industrial resilience, potentially giving rise to a new commodity supercycle.
The author’s central judgment is that critical minerals are no longer marginal metals but could become the centerpiece of the next commodity supercycle. Counterintuitively, while short-term markets (e.g., the MOMO momentum indicator) signal overbought correction risks, long-term fundamentals (structural demand growth and supply constraints) are strongly bullish. The author believes that tariff wars are just the beginning, with more chaos and evolution to come.
| Indicator | Data |
|---|---|
| China’s control of specific rare earth supply | ~90% |
| U.S. tariff peak on China | 145% |
| Global military spending (2024) | ~$2.7 trillion |
| Global military spending forecast (2035) | $6.38 trillion (CAGR 8%) |
| Critical minerals as share of global trade | ~3% |
| Critical minerals as share of global export restrictions | ~30% |
| New export restrictions added (2010-2022) | ~5,500 |
This chapter focuses on how China's dominant position in the global critical mineral supply chain constitutes a strategic vulnerability for Western countries, thereby introducing the structural drivers of the next commodity cycle. The report argues that geopolitical competition is elevating critical minerals from ordinary commodities to national security assets, prompting Western economies to accelerate supply chain restructuring.
The author's central judgment is that critical minerals are defining the next commodity super cycle, and the technical breakout of the Nasdaq Sprott Critical Materials Index is an early signal of this structural shift. The counterintuitive point is that, despite short-term market risks such as momentum-driven froth and seasonal weakness, the long-term fundamental bullish logic (a triple overlay of national security, energy transition, and trade restructuring) is far stronger than that of traditional commodity cycles.
1. China's Control Data: China holds a significant share of global processing capacity for critical minerals (including rare earths and lithium). The report specifically notes that China controls approximately 90% of the supply for certain rare earth elements.
2. Policy Response Scale: Over 20 countries have officially published lists of critical minerals, and there is significant overlap among these lists regarding defense-related and energy transition materials.
3. Demand Growth Forecast: The International Energy Agency's (IEA) May 2025 Global Critical Minerals Outlook provides demand growth forecasts for 2040 relative to 2024. Specific data is shown in the table below:
| Mineral Category | Stated Policies Scenario (STEPS) | Net Zero Emissions Scenario (NZE) |
|---|---|---|
| Rare Earths (Four Magnet Materials: Nd, Pr, Dy, Tb) | Significant Growth | Substantial Growth |
| Battery Metals (Li, Co, Ni, etc.) | Significant Growth | Substantial Growth |
| Strategic Minerals (Cu, U, etc.) | Moderate Growth | Significant Growth |
Note: The original text did not provide specific percentage values, but the chart indicates that rare earth demand growth is the largest under the NZE scenario, followed by battery metals.
4. Cost vs. Time Trade-off: The report acknowledges that Western economies will face higher supply chain relocation costs in the short term but views this as a necessary price for achieving long-term security.
This chapter does not directly name specific companies but implicitly involves the following asset classes:
1. Go Long on Critical Minerals Indices: The technical breakout of the Nasdaq Sprott Critical Materials Index is an entry signal, but investors should wait for short-term momentum indicators (e.g., MOMO) to pull back into oversold territory before building positions.
2. Focus on Western Supply Chain Beneficiaries: Prioritize allocation to companies with mines or processing capacity in North America, Australia, and the EU. These enterprises will directly benefit from "friendshoring" and resource diplomacy policies.
3. Beware of Short-Term Correction Risks: The current market exhibits momentum-driven froth, compounded by seasonal weakness (typically weaker summer demand). A phased position-building approach is recommended over a single lump-sum purchase.
4. Hold Long-Term, Avoid Trading: The report argues this cycle is structural, not cyclical. Investors should ignore short-term volatility and maintain a holding period of at least 3-5 years.