The U.S. and Ukraine have agreed on a raw materials deal. When it comes to rare earths, experts see little economic incentive to extract them in Ukraine. Trump’s real motivation likely lies elsewhere.
There is plenty of buzz around Ukraine’s raw material reserves – pictured here, production in the Zhytomyr region.
Ukrainian commodities are capturing U.S. interest. «It’s a very big deal. It could be a trillion-dollar deal,» U.S. President Donald Trump declared, touting a new raw materials agreement between Washington and Kyiv.
The two countries have agreed on a contract outlining future revenues from Ukraine’s resource extraction. Ukrainian President Volodymyr Zelenskyy said Wednesday that the terms were «acceptable» to him. But the deal’s success now hinges on Trump.
Which raw materials the American president hopes to secure from war-torn Ukraine remains unclear. Speaking to reporters, he offered only a vague reference to «rare earths and other things.» According to the draft agreement, Ukraine would channel 50% of its raw material revenues into a designated fund. This would also include future earnings from oil and gas extraction and their transport.
Industry experts remain puzzled by Trump’s ambitions. Rare earths play a critical role in key technologies – from digitalization and the energy transition to defense manufacturing. But when it comes to these metals, Trump appears to have vastly overstated Ukraine’s potential. The U.S. Geological Survey does not rank the country among the world’s top producers.
The global rare earths market remains firmly in China’s grip. In 2024, Chinese mines produced 270,000 tons, with total reserves estimated at 44 million tons, according to U.S. Geological Survey data.
Rising demand for rare earths
«Whether rare earths can be mined in Ukraine at all is entirely unclear,» says Jens Gutzmer, director of the Helmholtz Institute Freiberg for Resource Technology. While Ukraine does host deposits of these metals, they remain insufficiently explored to determine if economic extraction is viable. Moreover, some lie near the front lines or on territory occupied by Russian forces.
With the agreement’s details still under wraps, assessing its impact on commodity prices is challenging. «In principle, adding new supply sources would likely ease the current price pressures,» notes Simon Lustenberger, head of investment strategy at Zürcher Kantonalbank. Global trade regulations, such as customs duties, will also influence prices.
The global rare earths market is estimated to be worth roughly $15 billion a year, with demand steadily increasing. But current output more than meets existing needs. «There’s no price rationale for mining these materials in Ukraine,» Gutzmer says. Prices peaked 15 years ago, he notes, and since then several new European deposits have been identified. If the EU were to push for less reliance on China, it would likely turn to these sources first. However, Gutzmer estimates that it could take 12 to 15 years to develop any new deposits before production starts.
For Lustenberger, the key factor for new extraction projects is not the current price but the prospect of future supply shortages. «Companies often lock in access to potential deposits early on,» he explains.
One thing is clear: realizing the U.S. president’s ambitions in Ukraine would demand massive American investment. Estimating the costs is tricky, given the scant geological data available. It is uncertain whether mining could proceed through a cost-effective open-pit operation or if a more expensive underground mine would be necessary. Additionally, pinpointing rare earth deposits is far more challenging than locating oil and gas reserves, which can be identified via aerial surveys or even satellite imagery. Rare earth deposits are small and often elusive, making exploration very difficult.
Trump aims to counter China
Trump has hinted that he is eyeing more than just rare earths from Ukraine. His ambitions likely extend to other key metals – a more economically sound bet. Ukraine is estimated to hold a third of Europe’s lithium reserves, a critical resource for battery production. Gutzmer also highlights Ukraine’s deposits of titanium, manganese and iron. With these metals «there’s actually a great deal of economic activity in Ukraine,» Gutzmer says. The country is Europe’s only source of manganese, an essential steel-hardening metal.
Most likely Trump’s real objective is to try to weaken China’s dominance. That, however, may prove a tall order – especially when it comes to commodities. Beijing has long treated the sector as strategically vital. In 2023, China imposed an export ban on certain rare-earth processing technologies.
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