MP Materials and USA Rare Earth stocks jumped early Thursday after China applied a default ban on defense-sector exports of rare earth minerals and related technologies. The move may be an effort to apply leverage in U.S.-China talks ahead of a possible meeting between President Donald Trump and Chinese President Xi Jinping later this month.
China has had a near monopoly on processing of heavy rare earth materials that feed into end products like samarium-cobalt magnets. Such magnets maintain their magnetic properties under temperatures high enough to liquefy lead. They are critical for military hardware like Lockheed Martin's F-35 and Tomahawk missiles.
Non-China Rare Earth Supply Chain
Both MP Materials and USA Rare Earth are tied to U.S. government efforts to secure a non-China supply chain for rare earths, including for military uses.
The Pentagon, along with its recent $400 million investment in MP Materials for a 15% stake, also provided a $150 million loan for the company to separate heavy rare earth minerals at its Mountain Pass mining complex.
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On Sept. 29, USA Rare Earth announced the $227 million acquisition of U.K.-based Less Common Metals, which prior to the merger received a grant from the U.S. Department of Defense to expand samarium production in the U.K. in support of U.S. industry needs. USA Rare Earth also has mining rights to a deposit of heavy rare-earth materials in Texas from which it has extracted gallium and heavy rare earth concentrates.
USA Rare Earth recently confirmed discussions with the White House over possible new financing.
China Rare Earth Controls
The updated Ministry of Commerce rules for rare earth exports appear to be an effort to more broadly guard China's rare earth advantage, extending restrictions on exporting its mined output to certain downstream technologies and even the intellectual property in processing them.
CNBC reported that applications for rare-earth exports for advanced semiconductor manufacturing would be reviewed on a case-by-case basis.
Beijing used its rare-earth leverage to roil U.S. auto manufacturing in May, forcing President Trump to make concessions to get rare earth exports flowing again. Trump retracted a ban on exports of chip-design software and reversed his ban on exports of Nvidia's H20 AI inferencing chip, while slashing tariffs.
However, China takes exception to the remaining chip and chip-equipment controls put in place by President Biden, which would likely be part of any grand bargain between the two sides that results in a Trump-Xi summit. The two leaders are expected to attend the Asia-Pacific Economic Cooperation meeting in South Korea later this month.
MP, USAR
MP Materials rose 3.4% to 73.25 in early Thursday stock market action, reversing Wednesday's decline. Shares of MP stock have more than doubled since the U.S. announced its investment on July 10. MP has an 82.23 buy point from a cup-with-handle base, according to MarketSurge.
USAR rallied 4.3% to 28.12. USAR stock blasted past a 19.68 cup buy point with a 23.4% gain on Oct. 2, moving well beyond buy range.
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