Rare earths make gains amid battle to beat China’s dominance

Shares of U.S.-listed rare earth companies surged on Monday, driven by new Chinese export restrictions and intensified U.S. efforts to establish a domestic supply chain for critical minerals. The Trump administration, in collaboration with Australia, is pursuing joint ventures and considering price floors for rare earths, following a Defense Department deal with MP Materials that included an equity stake and price floor. This policy shift is leading investors to anticipate further government backing for miners like NioCorp (+20%) and USA Rare Earth (+14%), with William Blair initiating outperform coverage on the latter due to expected government stakes, signaling a strategic pivot in critical mineral sourcing.

Analysis

Shares of U.S.-listed rare earth and critical mineral companies rallied significantly on Monday, driven by new Chinese export restrictions requiring Beijing's approval for rare earth exports and explanations of their usage. NioCorp led gains with nearly 20%, while USA Rare Earth and Perpetua Resources advanced approximately 14% and 7% respectively, reflecting investor anticipation of increased domestic demand and government support. MP Materials also saw a more than 2% increase, following a prior Defense Department deal.

This market movement is underpinned by the Trump administration's aggressive strategy to establish a domestic rare earth supply chain, including a joint venture agreement with Australia and Treasury Secretary Bessent's stated intent to implement price floors to counter Chinese market manipulation. The Defense Department's prior deal with MP Materials, involving an equity stake and an offtake agreement, sets a precedent for anticipated further government backing for U.S. miners.

William Blair initiated 'outperform' coverage on USA Rare Earth, citing expectations of a material government stake, reinforcing the view that industrial policy is a key driver for the sector. While the U.S. possesses sufficient heavy rare metals for military use, industry experts like Michael Silver warn that the supply chain squeeze could severely impact electric vehicles, lasers, and commercial technology, emphasizing the national priority of domestic mining.

Key Decisions for Investors

• Investors should evaluate U.S.-listed rare earth miners, particularly those with high per-ticker sentiment like USA Rare Earth and MP Materials, given the strong government policy tailwinds and potential for direct investment or subsidies.
• Monitor the evolving geopolitical landscape and further Chinese export policy changes, as these directly impact global supply dynamics and the strategic importance of domestic production.
• Consider the long-term implications of critical mineral independence, recognizing that government-backed initiatives may provide sustained support and reduced market volatility for select domestic producers.