CME Group is working on a plan to launch the world's first futures contract in rare earth. If it goes through, this move would help numerous parties to hedge exposure to a sector dominated by China.

Reuters has spoken to three sources familiar with the matter. According to the information, CME is considering a contract tied to neodymium and praseodymium. Known together as NdPR, these two elements are critical for permanent magnets. Thus, vital for EV motors, wind turbines, drones, and advanced weapons systems.

The goal of the contract would be to create a transparent, liquid pricing benchmark outside China and allow producers, consumers, and financiers to hedge price swings. That, in turn, could unlock funding for Western mining and processing projects that have struggled to secure bank financing because of volatile prices and a lack of hedging tools.

"It's such a key missing piece of the puzzle for the industry right now," one of the sources said.

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