Rare earth elements may be a rarely discussed topic on Wall Street. However, this week started off with a bang for investors in rare earth mineral stocks, and especially MP Materials (NYSE:MP) stock.
Why is the spotlight suddenly shining on MP Materials now, and is there a prime buying opportunity here? The answers lie within the escalating trade war between two powerful nations — and after a rapid rocket ride, MP stock could have the elements of a long-term winner.
Why Rare Earth Minerals Are Crucial
Just to recap, rare earth minerals include 17 fancy-sounding elements such as scandium, promethium, and gadolinium. Don’t worry — I promise there won’t be a pop quiz about these elements.
The good news is that you don’t need to be a scientist to understand the importance of rare earth minerals. All you need to know is that they’re highly functional in a wide variety of use cases. These range from electric vehicle (EV) batteries and wind turbines to high-performance magnets, robotic surgical tools, and even missiles.
Researchers are exploring possible synthetic alternatives to rare earth elements, which, as the name implies, are rare. These minerals aren’t as rare in China, however, as that nation is the source of roughly 75% of the world’s mined rare earth elements.
Thus, China dominates the rare earths market and other nations, including the U.S., generally must work with China to obtain these crucial materials. However, as you are very likely aware, tensions abound as the U.S. and China are currently embroiled in a heated trade war.
The Rare Earths Battle Heats Up
Adding to the U.S.-China frictions are a couple of recent headline news items. First, in April 4, China’s government restricted the export of six heavy rare earth metals as well as rare earth magnets. Consequently, customs officials in China are blocking the export of these minerals and magnets to the U.S. and elsewhere.
Horizon Advisory co-founder Nathan Picarsic proposes that this may only be the start of a larger strategic offensive from China. “China is willing to escalate… This is likely an opening salvo in an iterative game of negotiation with the U.S.,” Picarsic warns.
As you might expect, President Donald Trump isn’t letting China’s rare earths salvo go unanswered. On April 12, citing “people familiar with the matter,” The Financial Times reported that the Trump administration is “drafting an executive order to enable the stockpiling of metal found on the Pacific Ocean seabed.”
This is, naturally, the White House’s “effort to counter China’s dominance of battery minerals and rare earth supply chains” as the U.S. seeks to “become self-sufficient in these critical minerals.” The Financial Times further reported that, under the White House’s plans, the rare earths stockpile would “create large quantities ready and available on US territory to be used in the future.”
Of course, the U.S. government doesn’t have the infrastructure or the manpower available to mine rare earth materials on a large scale today. This means the government must turn to private industry to fill the gaping rare-earths void. But which U.S.-based resource company can currently ramp up its rare earths mining capacity at scale?
MP Materials: An Obvious but Unexpected Winner
MP Materials isn’t the only American miner that drills for rare earth elements, but it’s a highly recognized company in this specialized space. Frankly, if you’re in the market for a pure-play U.S.-based rare earths investment, MP stock is probably your best bet.
That’s because MP Materials owns Mountain Pass, which the company claims is the “only integrated rare earth mining and processing site in North America.” So, the company boasts, “MP Materials serves as the beachhead for a renaissance in domestic manufacturing. It starts with us.”
This isn’t just empty braggadocio. In 2024’s fourth quarter, MP Materials produced 45,455 metric tons of rare earth oxides, a record for the company. Also that quarter, MP Materials grew its revenue 48% year over year to $61 million.
So, Monday’s massive rally in MP stock makes perfect sense. The American government will need help from private industry in its rare earths battle with China, and MP Materials appears ready and able to step up to the plate and deliver.
That said, I don’t recommend just buying MP stock based on one or two headline news items. The MP Materials growth story should be viewed as multi-year or possibly even multi-decade, based on America’s ongoing need for material-sourcing independence.
To put it another way, don’t buy MP Materials stock just because you read somewhere that Trump and China are mired in a rare earths mining war. Instead, consider a share position in MP Materials because these minerals are necessary elements — and because MP Materials has the necessary elements of a large-scale, revenue-growing rare earths superstar.
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