The trade spat between the U.S. and China has brought rare-earth metals back into the spotlight and sent the exchange-traded fund based on these minerals soaring.

The VanEck Vectors Rare Earth/Strategic Metals ETF (REMX) rose 15 percent in the last two weeks of May, and saw hefty inflows as Chinese state media reported China’s President Xi Jinping visited a rare-earth processing firm in southern China in late May. Additionally, media reports citing the People’s Daily newspaper said China is contemplating using rare-earth metals as retaliation in the trade war.

The 17 elements classified as rare-earth metals are used in rechargeable batteries for hybrid and electric cars, computers, military equipment and a host of other technology purposes. The name is a bit of a misnomer; the metals themselves aren’t necessarily rare, they just aren’t found in large, concentrated deposits, says Brandon Rakszawski, director of ETF product development at VanEck.

China has some unique geological deposits for these metals, but the U.S., Australia and a few other countries also have rare-earth metals, says David Morgan, editor of metals newsletter The Morgan Report. What China has in abundance, though, is refining capacity for these metals.

That’s critical because unlike metals like gold or silver, processing rare-earth metals is much more toxic than other metal refining, in part because of the acids used to separate the metals.

If trade spats and rare earths sound familiar, it should. In 2010, China reduced its export quotas globally, with some trade experts saying it was in retaliation to a territorial dispute between China and Japan, which China denies. That caused global prices to spike.

Eventually, the U.S., Japan and the EU brought a case to the World Trade Organization, which ruled against China. The country eventually dropped its export restrictions, causing prices to plummet.  

Rakszawski notes that REMX launched at the end of 2010, allowing the fund to participate both in some of the price run up and in the subsequent drop.

He says the timing of the fund’s launch was coincidental. “It was well in the works before then, but you can see based on some of the run up in price there was certainly demand at the time for access to the space.”

It’s hard to draw direct parallels between what happened in 2010-11 and now because the situations and supply chains are different, Rakszawski says. In 2010-11 it was a global restriction, now it’s primarily targeted at the U.S. While China remains the dominant player, they don’t have the stranglehold they once did. Australia’s Lynas Corp., for example, has mines in Australia and a refining facility in Malaysia.

It’s hard to say what role—if any—rare earths will play in trade negotiations, Morgan and Rakszawski both say.

Looking at REMX, the fund provides access to more than just rare earths with its inclusion of what VanEck calls strategic metals such as tungsten and manganese. The fund follows the market-cap weighted MVIS Global Rare Earth/Strategic Metals Index composed of 20 mining companies. The largest country weights are China (26 percent), Australia (25 percent) and Canada (10 percent). It has $257 million in assets under management, and about $140 million has come within the past two weeks, Rakszawski says. REMX has an expense ratio of 0.59 percent.

Frankly, the fund’s performance has been erratic, if not poor. While it’s up 7 percent year to date, it’s down 37 percent on a one-year basis. It has an average three-year return of 0.5 percent, but has posted an average annualized loss of 12 percent during the past five years. The closest comparison for a benchmark would be Morningstar’s equity precious metals category, which is up 2 percent year to date, down 10 percent on a one-year basis, down 3.6 percent on a three-year basis and down 2 percent on a five-year basis.

Rakszawski says REMX was created to provide access to an otherwise difficult-to-trade part of the market.

“I would never discuss this with clients and investors as a core position,” he says. “I think you have to be aware of the industry and have some sort of view on where you are in a commodity cycle, and where supply and demand trends are heading.”

Even if rare-earth prices skyrocket and become a key part of negotiations, Morgan says don’t expect the U.S. rare-earth mine in Mountain Pass, Calif., to contribute to supply. The mine’s prior owner, Molycorp, went bankrupt after prices on rare earths plummeted in 2012. And, he points out, when Mountain Pass was operational it sent the ore to China for processing anyway. Even though the mine has new owners (it was bought by an American-led consortium that includes a Chinese rare-earth miner as a minority, non-voting partner), it will take years to ramp up mining production there.

Morgan is taking a wait-and-see approach on rare-earth metals, and says investors need to be cautious regarding this subsector of commodities. “This is not like speculating in precious metals,” he says.