Key Takeaways
- Shares of USA Rare Earth jumped on Friday after its CEO said the rare earths miner was “in close communication” with the Trump Administration, sparking hope on Wall Street it could be the next target for government investment.
- The Trump administration this year has taken stakes in several strategically significant companies, including a lithium miner and another rare earths supplier.
- China controls the vast majority of the world’s supply and processing capacity for rare earths, critical components in a range of industrial and military applications.
Shares of USA Rare Earth (USAR) soared on Friday after its CEO said the supplier of rare earth magnets and minerals was in talks with the Trump White House.
USA Rare Earth chief Barbara Humpton said in an interview with CNBC on Thursday afternoon that the company was “in close communication with the administration,” when asked whether the company would be open to an investment by the federal government.
The Trump administration this year has taken equity stakes in several companies mining strategically significant elements. Earlier this week, the Department of Energy said it would restructure a previous deal with Lithium Americas Corp. (LAC) to take a 5% stake in the Vancouver-based company and an equal stake in the Thacker Pass lithium mine it’s developing in Nevada. And in July, the Department of Defense agreed to buy $400 million of MP Materials (MP) stock and become the rare earth miner’s largest shareholder.
Why This Is Significant
Rare earth minerals are a critical component of key industrial and military equipment, which is why the Trump administration has made it a priority to reduce America’s dependence on China and bolster domestic supply. Investors expect the White House to continue pursuing investments in strategically significant companies.
USA Rare Earth stock was up 15% in recent trading after rising 23% yesterday. Lithium Americas was recently up 28%, while MP Materials, the best-performing stock in the Russell 1000 this year, gained 3%.
Why Rare Earths Are Ripe For Investment
The investments are part of the Trump administration’s efforts to reduce American dependence on China for the minerals required to make key industrial components, like advanced batteries and magnets found in weapons systems.
China, which produces and processes most of the world’s rare earth minerals, curbed shipments to the U.S. earlier this year in response to President Trump’s tariffs. While shipments rebounded over the summer after the two countries reached a tentative trade deal, the incident laid bare the tenuousness of America’s critical minerals supply chain.
U.S. demand for neodymium magnets, a powerful magnet with a range of industrial and military applications, is expected to increase fivefold over the next decade, according to a Bank of America note published Friday. But even with recent investments, the U.S. is expected to rely to some degree on imports, analysts said. BofA expects that, without Chinese supply, the world will also struggle to supply enough rare earth oxides to meet booming demand.
