Rare-earth materials and rare-earth magnets are crucial to the modern economy, and China dominates the global supply of both. That statement serves as the starting point for understanding why a $100 investment in MP Materials (MP 3.48%) a year ago would be worth $329 as I write this. It also indicates where the stock could be headed next.
MP Materials' wild year
According to the International Energy Agency (IEA), China in 2024 was responsible for 59% of the rare-earth materials mined, 91% of the refined materials, and 93% of the strongest type of rare-earth materials. China's position provides it with significant leverage in the ongoing trade conflict with the U.S..
NYSE: MP
Key Data Points
With the need to secure a domestic supply of rare-earth materials, the U.S. Department of Defense (DOD) entered into a transformational agreement with MP Materials in the summer, involving $400 million worth of investment in stock, $150 million in loans, a $1 billion financing commitment from leading U.S. banks, and a 10-year price floor commitment from the DOD.
A few days later, Apple announced a $500 million partnership whereby MP Materials will supply Apple with rare-earth magnets.
These deals will help secure MP Materials' plans to build a new rare-earth magnet production facility (known as the 10X Facility) in conjunction with expansion at its Texas facility.
Image source: Getty Images.
Where MP Materials goes next
Whether investors like it or not, the wild swings in MP Materials' stock price are dictated by developments in U.S./China trade relations. Since rare-earth materials are still a significant leverage for China, more volatility seems assured. And the fundamentals surrounding the stock, such as assessments of future rare-earth magnet pricing in the U.S., are also influenced by political developments.
I think the stock is best avoided.
