Reversing course after a terrific week preholiday, shares of rare-earth minerals miner MP Materials (MP -2.07%) gave back most of last week's gains on Monday, sinking 12.2% through 11:40 a.m. ET and returning its share price to where it sat roughly 10 days ago.
The reason probably has a lot to do with President Donald Trump's tariff battle with China.
MP Materials and the tariffs
President Trump has raised tariffs on Chinese imports to about 145% over the last few weeks. China has retaliated with 125% tariffs on imports from the U.S.
In light of this retaliation, MP Materials announced Thursday that it is halting shipments of rare-earth concentrates to China for processing, noting that "selling our valuable critical materials under 125% tariffs is neither commercially rational nor aligned with America's national interest." That makes sense, but it does come with a downside.
According to the company's most recent annual report, one single customer in China, rare earths refiner Shenghe Resources Holding, accounted for about 80% of consolidated revenue for the year ended Dec. 31.
Translation: 80% of MP Materials' export business just got vaporized by Trump's tariffs policy.
Is MP Materials stock a sell?
Not all the news is bad. MP says that it has been preparing for this moment since the start by building factories capable of refining its own concentrate and manufacturing its own rare-earth batteries. The plan will therefore be to produce and stockpile concentrate while accelerating downstream operations.
In the near term, however, it's likely MP will suffer a steep drop in revenue and perhaps even larger losses than were previously expected. Long term, Wall Street still expects to see MP Materials turn profitable, but no sooner than 2026.
It's going to be a long 12 months for investors as we wait to see how that works out.
