Rare earth stocks moved higher Monday after Beijing's denunciation of President Donald Trump's intervention in Venezuela underscored the urgency of setting up a non-China supply chain for rare earth magnets critical for the U.S. military. MP Materials (MP), USA Rare Earth (USAR), American Resources (AREC), NioCorp Developments (NB) were among stocks to post gains.
Until Friday, the once red-hot rare-earth sector turned ice cold over the past few months, particularly after Trump and Chinese President Xi Jinping agreed to meet in South Korea in October, and reached some accommodation over rare-earth access. Yet while China backed away from a plan to impose much broader export restrictions, there's no indication that Beijing has freed up exports of seven critical minerals that it locked up in April.
Now as the U.S. flexes its military might and asserts authority over the Western Hemisphere, challenging China's influence in Latin America, a broader accord over rare earths looks even more doubtful. The upshot: The limited U.S. stockpile of rare-earth magnets has necessitated an all-out push by the Trump administration to establish new sources of supply by providing funding and making investments in the sector.
China Condemns 'Reckless' U.S. Action
Beijing said it strongly condemned "the reckless use of force by the United States against a sovereign state." Xi had hosted Maduro in 2023, highlighting the countries' economic relationship.
China is the top destination for Venezuela oil exports. State-owned China National Petroleum Corp. is engaged in a oil-reserve development joint venture with Venezuela's state-owned PDVSA. A private Chinese firm also reportedly began developing two Venezuelan oil fields this year, according to the South China Morning Post.
The fate of those deals may be in question after Trump said Saturday that the U.S. will essentially "run" Venezuela and that large U.S. oil companies could "go in, spend billions of dollars, fix the badly broken (oil) infrastructure."
Tension over Chinese investments in Venezuela, as well as in other countries in the region, follows release of the White House's new national security strategy last month that added a "Trump corollary" to the Monroe Doctrine. It asserts that the U.S. will deny China and other "non-hemispheric" competitors the ability "to own or control strategically vital assets" in the hemisphere.
China Rare-Earth Exports
The Trump administration said in late October that China had agreed to a one-year deferral of its expanded export-control regime. However, Beijing never said that the April export controls targeting seven critical minerals were part of the deal. Those medium and heavy rare earth minerals include samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium.
These minerals, partly for the ability to withstand extreme heat, are critical for military hardware like Lockheed Martin's (LMT) F-35 fighter jet, RTX (RTX) Tomahawk missiles, nuclear-powered submarines, Predator drones and more.
A Dec. 22 New York Times report appeared to provide confirmation that the seven restricted rare earth minerals are still off limits to "defend world peace," according to the Chinese Embassy in Washington. "Foreign companies that use samarium for military purposes are no longer allowed to buy it," the Times reported.
U.S. Stake In MP Materials
The Trump administration's first big move to shore up the rare-earths supply chain last July included a $400 million investment in MP Materials and a commitment to buy its neodymium-praseodymium oxide (NdPr) for double the market price. NdPr is used to produce magnets for uses such as electric vehicle motors, which explains why General Motors (GM) signed on as MP's first major customer of MP.
The Times report indicated that a major stash of samarium held by Solvay, a Belgian chemical company that had exited rare-earth refining due to cheap prices in China, gave the defense industry a one-year reprieve for the key mineral.
The Pentagon also provided MP a $150 million loan for separation of heavy rare earth minerals at MP's Mountain Pass mining complex in California. Yet that project is just a first step toward production of samarium-cobalt magnets.
Other Rare Earth Stocks
However, there are a host of other companies, some with government funding, working to fulfill defense industry needs from mining to magnet production.
Australia's Lynas Rare Earths (LYSCF) is expanding its operations in Malaysia to include samarium-processing capability, with output slated for April.
USA Rare Earth is close to opening a magnet facility in Stillwater, Okla. In September, the company acquired U.K.-based Less Common Metals, which won a U.S. Defense Department grant to expand samarium metal production in the U.K. in support of U.S. industry needs. The purchase accelerated USA Rare Earth's strategy to build an integrated mine-to-magnet supply chain.
ReElement Technologies, which is 19%-owned by American Resources, has a "unique process to separate and refine rare earth elements that achieves near 100% purity," William Blair analyst Neal Dingmann wrote in an Oct. 21 note. On Nov. 3, ReElement announced $80 million in funding from the Pentagon's Office of Strategic Capital. The loan was part of $1.4 billion in public and private funding to ReElement and Vulcan Elements for their partnership to scale up to 10,000 metric tons of rare earth magnet production.
NioCorp is targeting February for initial production of scandium metal using patented technology that has advantages over the traditional processing method. NioCorp is supplying aluminum-scandium alloy components for next-generation fighter platforms as part of a $10 million Pentagon-funded joint development program with Lockheed Martin's Skunk Works.
Canada-based Ucore Rare Metals (UURAF), which has received $22.4 in U.S. Defense Department funding, is building a plant in Louisiana that's on track to begin processing heavy rare earth minerals later this year. The company says its RapidSX technology platform is able to process rare earths at triple the rate of conventional processing and requires a smaller footprint.
Rare Earth Stocks
MP jumped 6.6% on Monday, closing above its 50-day moving average for the first time since Oct. 21. Sharfes traded more than 2% higher Tuesday morning.
USAR surged 11.7% Monday to 15.80, also clearing its 50-day line. The stock was up more than 3% Tuesday.
American Resources leaped 19.5% to 3.25, also retaking its 50-day line. NioCorp climbed 5.7% to 6.29, joining other rare earth stocks in retaking the 50-day moving average.
Lynas and Ucore, which both trade over the counter, rose 8% and fell 3.1%, respectively.
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Source: www.investors.com
Aleksei Andrievskii is the founder of the ANDRIEVSKII SEA WEALTH family office in Cyprus, a member of the advisory board at Bendura Bank AG, Liechtenstein