Lexicon Financial Group Weekly Update — October 29, 2025

Oct 31

“Rare earth minerals power the technologies that define modern life—from clean energy and digital devices to national defense.”

— U.S. Department of Energy

From the desk of Craig Swistun, CIM, MFA-P, Portfolio Manager, Raymond James Investment Counsel, and Wayne Hendry, Client Relationship Manager, Raymond James Investment Counsel

ISSUE 202

Looking Around

According to BBC North America correspondent Anthony Zurcher, “12 out of 10” is how President Trump rated his talks with Chinese President Xi Jinping at Busan airport in South Korea.

This meeting capped off Trump's brief tour of Asia and resulted in a partial stand-down in ongoing trade tensions, including a reduction of tariffs on some Chinese goods entering the United States (U.S.). China has agreed to suspend export controls on rare earths, which are critical for producing technology products, from electric vehicles to smartphones. Trump has also said China will start again purchasing U.S. soybeans and other farm products. However, there is still no ink on paper for a deal between the two largest economies in the world. (1)

Rare earths or rare earth minerals are a group of 17 heavy metals that are abundant throughout the Earth’s crust. The United States Geological Survey estimated, in 2024, there were 110m tonnes of deposits worldwide. This includes 44m tonnes in China - by far the world’s largest producer.

Other countries that have significant rare earth mineral deposits include Vietnam, Brazil, Russia and India. Mining these rare earth minerals is expensive and requires chemical extraction techniques that result in toxic waste. For decades, China has been a leader, investing massively in mining and refining operations. Consequently, many companies around the world rely on China for the refining of their ore. (2)

To protect the supply, Trump has signed a flurry of deals on this most recent trip, before meeting with Xi Jinping. Although it is too early to assess the tangible impact of U.S. deals signed with Japan, Malaysia, Thailand, Vietnam and Cambodia, they all include efforts to diversify access to these minerals.

But, even before Trump travelled to Asia this week, he clinched an USD 8.5 billion deal with Australia that promises industrial co-operation and joint investment to build processing capacity for rare earths. A critical minerals deal with Japan involves the two sides agreeing to boost the supply, production and stockpiling of rare earth minerals along with the creation of a Rapid Response Group to manage supply shocks.

These deals could eventually challenge China's stranglehold over rare earth minerals but, according to experts, it will be a costly process that will take years to achieve this. Why? Well, according to Patrick Schroder, senior research fellow at the Environment and Society Centre at Chatham House, compared to China, building new mines, refining facilities, and processing plants in regions such as Australia, the U.S., and Europe has much higher capital costs, stricter environmental regulations, and more expensive labour and energy inputs. For example, building a single processing plant can take years, from design to full production. Australia, which has been serious about ramping up production of rare earth minerals for some time now, still does not have its plants up and running. (3)

Mining and processing rare earth minerals is an evironmentally dirty business. It involves extraction, leaching, thermal cracking and refining. All of these produce nasty side effects, including radioactive components. The impact of mining and processing rare earth minerals in China has been well-documented, which has meant that it's not an industry other countries have readily embraced. Unlike China, democracies in the West cannot simply ignore environmental regulations and push ahead with the mining and processing of rare earth minerals, no matter the environmental cost.

China controls about 70 per cent of rare earth minerals processing. Catching up will need immense amounts of capital, strong environmental laws and specialised technical expertise.

Although China is a dominant player in the mining and processing of rare earth minerals today, the U.S., anchored by the Mountain Pass mine in California, was a major producer in the 1990s. However, after a wastewater-related legal action in 1997 involving the mine, U.S. output collapsed, which created room for China to scale rapidly. China increased its output from around 31,000 metric tons in 1994 to 270,000 metric tons in 2024. Chinese suppliers undercut American producers, thanks to Chinese government support, lower environmental standards, and cheaper labour. Following the 1997 wastewater spills and legal actions, U.S. output fell to 5,000 metric tons in 1998–2002, and then to zero for much of the 2000s and early 2010s. In the late 2010s, there was a revival in U.S. production, which reached around 46,000 metric tons in 2024. (4)

It took China a few decades to become a market leader in rare earth extraction and processing; it will take some time for other countries to make the necessary investment to catch up.

Read and Watch

Want deeper insight into topics in your Weekly Update? Then, read and/or right click:

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Looking Back

The S&P/TSX composite index (TSX) rose at the end of last week, helped by strength in the technology sector, as investors shrugged off new trade frictions between the United States and Canada. For the week, the TSX was up 0.8 per cent. (5)

In the U.S, stock markets advanced last week, despite volatile headlines related to U.S.-China trade relations and a surge in oil prices, after the U.S. announced sanctions against Russia’s two largest oil companies. The small-cap Russell 2000 Index and the S&P MidCap 400 Index outperformed their large-cap counterparts. Within the S&P 500 Index, information technology and energy led the way; utilities and consumer staples lost ground.

The ongoing U.S. government shutdown has disrupted the release of key economic data series but the Bureau of Labor Statistics put out the September inflation numbers last Friday (more than a week after their scheduled publication date), to allow the Social Security Administration to calculate its annual cost-of-living adjustment. Headline inflation increased to 3.0 per cent from the 2.9 per cent annual rate registered in August but was below the Bloomberg consensus estimate of 3.1 per cent. U.S. Treasury notes fluctuated throughout last week and moved lower before drifting higher, ahead of the release of monthly inflation data. Yields on one- and three-year Treasuries ended the week higher, whereas 10-year yields declined.

The pan-European STOXX Europe 600 Index ended 1.68 per cent higher last week, while other major stock indexes rose as well.

Japan’s stock markets rose sharply over last week, as investors welcomed the election of the Liberal Democratic Party’s (LDP) Sanae Takaichi as Japan’s prime minister. It is expected that her focus on the economy and proactive fiscal policy will likely be positive for stock prices. On the economic data front, inflation in Japan remained above the Bank of Japan’s two per cent target, with the nationwide core consumer price index (CPI) rising 2.9 per cent year over year in September. This matched expectations but accelerated from the prior month’s 2.7 per cent. Energy and food prices drove this increase.

Mainland Chinese stock markets rose amid strength in technology-focused shares, despite economic data highlighting weak domestic demand. Although China’s economy grew 4.8 per cent in the third quarter from a year ago, other data highlighted several pockets of weakness in China’s economy. Retail sales grew 3.0 per cent year over year (YoY) in September - the slowest pace since November last year. However, industrial output rose a better-than-expected 6.5 per cent YoY in September, driven by the booming export sector. Weak domestic demand continues to hobble China’s economy. Encouraging people to spend more and save less has become a matter of growing urgency for the Chinese government, amid a rise in global trade protectionism. A yearslong housing market slump and persistent deflation has sapped consumer demand. (6)

The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.