The case for rare-earth stocks like MP Materials (NYSE: MP) and USA Rare Earth (NASDAQ: USAR) rests on the argument that demand for domestically produced rare-earth magnets will be strong enough to create favorable pricing conditions, and that both companies will effectively…
plement their “mine-to-magnet” business strategy. The two issues are intrinsically linked and closely tied to efforts to reshore manufacturing to the U.S
Reshoring requires rare-earth materials Perhaps the most illustrative example of the importance of reshoring and the strategic significance of rare-earth materials and magnets comes from last year’s events involving MP Materials. In the span of less than two weeks, the company entered into a transformative public-private partnership with the Department of Defense that secured a 10-year price floor commitment for its materials, a 10-year commitment to ensure magnets produced at MP Materials’ new 10X facility will be purchased, commitments to $1 billion of financing, as well as a $150 million loan from the DOD and a $400 million investment in stock by the DOD. A few days later, Apple signed a $500 million long-term supply agreement with MP Materials to secure “rare-earth magnets manufactured in the United States from 100 percent recycled materials” from its Fort Worth, Texas, facility.
A few days after that, MP Materials raised $650 million in a public offering. Strategic importance of MP Materials and USA Rare Earth None of these developments is coincidental. The U.S. government is actively supporting the development of domestic rare-earth magnets and securing the financial future of MP Materials (the U.S. government also made a supportive deal with USA Rare Earth) to reduce reliance on rare-earth materials and magnets from China.