The US government is poised to become the largest shareholder in the nation’s only operational rare earths mine. Operations at Mountain Pass, California, mark the first step for US’s national strategy. Rare earths refer to a group of chemically similar metallic elements that are crucial in technologies such as electric cars and wind turbines. The access and control of these metals constitute a major portion in the US-China trade war. Currently, Beijing controls about 90% of global mining capacity.
MP Materials, which owns and operates the Mountain Pass mine, has entered into an agreement with the US Department of Defense with the aim of reducing America’s dependency on rare earth imports. Under the deal, the US government will commit for the next 10 years, the US Government will commit to MP Materials receiving a minimum price of $110 per kg for its neodymium and praseodymium output, two of the most in-demand among the 17 rare earth elements critical to the global economy. They are crucial for making permanent magnets, which are found in everything from smartphones to MRI scanners and electric motors.
The strategic move comes amid concerns that China has used its near total control of the industry to push prices down and force companies in other countries out of business. Under the agreement, MP Materials, the only operational rare earth mining and processing facility in the United States, will build a new US facility to increase the amount of raw material it can process into usable products.
The deal means that for the next 10 years the US government will commit to MP Materials receiving a minimum price of $110 per kg for its neodymium and praseodymium output. The location of the new facility is yet to be finalized, but it is set to cater for both commercial and defense customers.
The deal includes a $400 million share purchase by the Department of Defense. "This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence," said MP Materials founder and chief executive James Litinsky.
Shenghe Resources, a company partly owned by the Chinese Government, has been one of MP Materials’ largest shareholders up until now. It was the sole customer for the output of the Californian mine.
MP Materials cited the steep 125% tariffs as a reason to stop sending the rare earth to China for refining. The 125% tariff was a retaliatory move by China in response to the 145% tariffs imposed on Chinese imports by US President Donald Trump.
Recently China introduced a new export licensing regime that severely limited the inflow of these materials to America.
Recent trade talks in London and Geneva between major economies aimed to improve the access, in exchange for lifting some of the US’s own export restrictions in other areas.
China’s move with tightening the exports have also led to criticism in Europe, with the European Parliament voting in favor of a resolution that called Beijing's controls "unjustified" and "intended to be coercive". Immediate action to formulate the Critical Raw Materials Act, designed to reduce Europe’s reliance on imports, was urged by the European Commission.
On a visit to Germany last week, China's Foreign Minister Wang Yi downplayed these concerns, saying it was his country's "sovereign right" as well as being "common practice" to control exports of goods that have both commercial as well as military uses.
In the long term, boosting domestic supply remains America’s strongest strategy for securing access to rare earths— vital for the manufacturing revival central to Trump’s economic vision.
