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VanEck: The New Arms Race is a Metals Race

As defense budgets surge worldwide, steel, copper, aluminum and rare earths are becoming strategic inputs, with China controlling much of the supply.

24 SEPT, 2026

By VanEck

Marketing communication

Global rearmament is a metals race in disguise. Defense budgets are surging, hardware drives the spend, and China controls the supply.

After the Cold War, Western nations scaled back defense investment and industrial capacity.ⁱ Today the US builds just 0.1% of the world's ships and barely a third of its target submarines.ⁱⁱThe strain became clear in the 2026 Iran campaign, when the US fired over 2,100 cruise missiles that it cannot replace for years.ⁱⁱⁱChina absorbed much of that capacity, increasing Western reliance on a strategic rival.

The Rearmament Surge

Global defense spending jumped 9.7% in real terms in 2024 and reached $2.9 trillion in 2025, with Europe leading the surge.^ivAt NATO's 2025 Summit, 31 of 32 members pledged 5% of GDP by 2035 — more than double today's guideline.^vThe US alone is requesting $1.5 trillion for 2027, the largest military buildup since WWII and a 44% increase over 2026.^vi

Hardware Means Metals

NATO members now direct 32% of budgets to procurement; if the 5% pledge is met, spending over the next decade could approach $30 trillion, with nearly $10 trillion on hardware alone.^viiPlease note that such projections may not materialise, and there is a risk of losing all or part of the investment.

Behind this hardware buildout lies another strategic requirement: metals. Fighter jets, destroyers and missiles rely on the same critical metals. The article examines four key ones:

• Steel — the backbone of naval vessels, with specialty grades controlled by just a handful of mills.

• Copper — military production consumed over 10% of the world's refined copper output in 2021, compounding roughly 14% a year since.^viiiDrone- and missile-heavy warfare further increases the demand.

• Aluminum — a key input for drones, cruise missiles, and lightweight munitions, with rising demand and constrained Western production capacity drawing strategic attention. • Rare Earths & Minor Metals — China produces 97% of the world's samarium, 98% of gallium, and 83% of tungsten, and has restricted exports of gallium, germanium, and antimony, with the block on military buyers remaining even after a 2025 trade truce.^ixUS law banning Chinese-sourced defense magnets takes effect in 2027, accelerating the need for domestic alternatives.^x

Key Metals and Minerals Inside Major Defense Systems

_{Source: The Hague Centre for Strategic Studies (2020). “Strategic Raw Materials for Defence: Mapping European Industry Needs”.}

Three VanEck Funds to Access the Theme

1. VanEck Defense UCITS ETF — tracks the MarketVector™ Global Defense Industry Index, offering exposure to defense contractors and platform manufacturers. Yet, the fund is subject to risks associated with investing in the defense sector, including sector concentration, geopolitical and regulatory risks.

2. VanEck Rare Earth and Strategic Metals UCITS ETF — tracks the MVIS® Global Rare Earth/Strategic Metals Index, covering miners, refiners, and processors of rare earths and minor metals — a critical part of the value chain facing significant supply constraints. Investing in natural resources companies involves risks including commodity price volatility, geopolitical developments and exposure to emerging markets.

3. VanEck S&P Global Mining UCITS ETF — tracks the S&P Global Mining Reduced Coal Index, offering exposure across diversified producers of iron ore, copper, and aluminum — a more diversified but also more cyclical route into the rearmament demand story. Risks associated with the Fund include commodity price volatility, cyclical market conditions and exposure to emerging markets.

Rearmament is not only a defense story — it is also a materials story. As governments rebuild military capacity, strategic metals are becoming increasingly important inputs, creating potential opportunities across defense, mining and critical materials. The pace and scale of this trend may vary over time, while geopolitical, commodity and broader market developments will continue to shape the investment landscape.

IMPORTANT INFORMATION

This is a marketing communication.

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_{The MarketVector™ Global Defense Industry Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH (“MarketVector”), Solactive AG has no obligation to point out errors in the Index to third parties. VanEck’s ETF is not sponsored, endorsed, sold or promoted by MarketVector and MarketVector makes no representation regarding the advisability of investing in the ETF. It is not possible to invest directly in an index.}

_{The S&P Global Mining Reduced Coal Index is a product of S&P Dow Jones Indices LLC and its affiliates (“SPDJI”). S&P®, is a trademark of S&P Global, Inc. or its affiliates (S&P) and has been licensed for use by VanEck. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). VanEck’s ETF is not sponsored or sold by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P Global Mining Reduced Coal Index. It is not possible to invest directly in an index.}

_{MVIS® Global Rare Earth/Strategic Metals Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH (“MarketVector”), Solactive AG has no obligation to point out errors in the Index to third parties. VanEck’s ETF is not sponsored, endorsed, sold or promoted by MarketVector and MarketVector makes no representation regarding the advisability of investing in the ETF. It is not possible to invest directly in an index.}

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_{© VanEck (Europe) GmbH ©VanEck Switzerland AG © VanEck Securities UK Limited}

_{ⁱU.S. Department of Defense, “Strategic and Critical Materials in the Defense National Stockpile,” Report to Congress, December 1998}

_{ⁱⁱJ.P. Morgan, “U.S. Defense Industrial Base,” Revised Edition, 2026; Congressional Budget Office, Challenges Facing the Navy’s and Coast Guard’s Shipbuilding Programs, April 2026. ⁱⁱⁱCBS News, “Rapid pace of interceptor and precision-guided weapons use worries Trump administration,” July 23, 2026.}

_{^ivStockholm International Peace Research Institute (SIPRI), Trends in World Military Expenditure, 2025, April 2026.}

_{^vNATO Hague Summit Declaration, June 2025.}

_{^viU.S. Department of Defense, FY2027 Budget Request Overview Book, April 2026; White House, “Rebuilding Our Military: FY2027 Budget Fact Sheet,” April 2026.}

_{^viiNATO, Defence Expenditure of NATO Countries (2014–2025), Table 8a, August 2025.}

_{^viiiGregory Wischer, Morgan Bazilian and Macdonald Amoah, “As America’s Military Rearms, It Needs Minerals—and Lots of Them,” Modern War Institute at West Point, 29 November 2023. https://mwi.westpoint.edu/as-americas-military-rearms-it-needs-minerals-and-lots-of-them/}

_{^ixChristopher Hernandez-Roy, Henry Ziemer and Alejandra Toro, “Mining for Defense: Unlocking the Potential for U.S.-Canada Collaboration on Critical Minerals,” Center for Strategic and International Studies (CSIS), 18 February 2025.}

_{^xFinancial Times, “Defence groups clamour to delay US ban on Chinese rare earth magnets,” May 2026.}

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