VanEck: The New Arms Race is a Metals Race 

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.ⁱⁱ The strain  became clear in the 2026 Iran campaign, when the US fired over 2,100 cruise missiles that it cannot  replace for years.ⁱⁱⁱ China 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.^iv At NATO's 2025 Summit, 31 of 32 members pledged 5% of GDP by 2035  — more than double today's guideline.^v The 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.^vii Please 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.^viii Drone- 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.^ix US 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 

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

_{ⁱⁱ J.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. ⁱⁱⁱ CBS 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.} 

_{^v NATO Hague Summit Declaration, June 2025.} 

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

_{^vii NATO, 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/}

_{^ix Christopher 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.} 

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