President Donald Trump and Chinese President Xi Jinping held a phone conversation Thursday, agreeing to a new round of trade talks. The call came amid a U.S.-China standoff over rare-earth magnets. The magnets are key to EV motors, F-35 fighter jets, Tomahawk missiles and many other products. MP Materials, the primary U.S. producer of rare-earth magnets, surged this week, tacking on further gains Thursday amid news of the Trump-Xi call.
However, MP stock came off its highs amid news that the two sides agreed to further talks. That raises hope that China won't weaponize its rare-earths dominance.
U.S. Rare-Earths Dependence On China
Keep in mind that MP stock is pretty volatile. It surged in mid-April after Beijing initially froze rare-earth exports, only to fall by more than one-third over the next six weeks that saw a U.S.-China trade truce. Yet the sudden recognition that America's rare-earth dependence on China is a massive risk to national security could have dramatic implications for MP.
President Trump faces a negotiation in which the other side has leverage. He wrote on Truth Social early Wednesday morning that Chinese President Xi Jinping "is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!"
U.S. automakers earlier sounded an alarm that a shortage of rare earths could sideline production this summer. Industry analysts also believe that defense industry stockpiles are fairly small.
There's no short-term solution to finding an alternative supply for rare-earth magnets outside China, which controls 90% of production. But rare-earths supply issues will be a concern as demand from EVs, robotics and drones grows by double-digit percentages.
"For years, we have warned that the global rare earth supply chain was built on a single point of failure," MP CEO Jim Litinsky said on the May 8 Q1 earnings call. "The vulnerabilities in global supply chains are no longer theoretical."
What Rare-Earth Standoff Means For MP
MP has methodically ramped up its capacity to produce rare earth concentrate from its Mountain Pass, Calif., mine. It turns it to NdPr metal commercial-grade magnets at its manufacturing facility in Austin, Texas. But while its execution risk faded, MP stock is held back by the pricing backdrop.
In Q1, the realized price for separated NdPr products fell 16% from a year ago to $52 per kilogram. The incentive price for rare earth metals needed to stimulate investment outside China "is many multiples of today's market price," MP CFO Ryan Corbett told a May 20 forum hosted by BofA Securities.
Ryan Castilloux, founder of Adamas Intelligence, elaborated. "The prices we see in China are not market prices. They're strategically designed prices to fend off competition and to feed their downstream champions (such as EV and wind turbine makers) with cheap inputs."
That suggests some combination of market-driven price increases, tariffs and subsidies is needed to fuel the continued expansion of MP and the industry in the U.S.
On the earnings call, Litinksy said that MP "should grow to many multiples of its current scale."
What's changed, he says, is that MP is "now in active discussions with major commercial and government stakeholders who recognize the urgency of this moment and are eager to accelerate our mission."
MP Stock
MP stock climbed 3.5% to 25.45 in Thursday morning stock market action, after an 11.7% move on Wednesday. Yesterday's advance lifted MP past its 50-day moving average, flashing an early entry opportunity.
MP stock is now up around 9% from its 50-day line, raising the risk of chasing it from here. MP is right near the top of a buy zone from a 24.01 cup-base buy point that it first crested in early February.
The 29.72 52-week high on April 15 could eventually serve as a buy point in a new base if the consolidation continues.
MP has a 21-day average true range of 6.9, according to MarketSurge. That puts it among high-octane stocks that shouldn't make up too high a percentage of investor portfolios.
