USA Rare Earth (USAR +2.79%) stock jumped 11% through 11:55 a.m. ET Wednesday as investors continue to guess whether China will or won't ease restrictions on rare-earth magnet exports -- flooding global markets with magnets, and threatening USA Rare Earth profits.
The good news: Today, it seems China may not ease those restrictions.
Image source: Getty Images.
China vs. USA Rare Earth
Chinese rare-earth exports to the U.S. grew 26.4% in April, ahead of President Trump's summit with Xi Jinping. Post-summit, the White House announced a Chinese promise to "address U.S. concerns over supply chain shortages of rare earths."
Both those things are good news for rare-earth importers, but bad news for USA Rare Earth, which competes with low-cost Chinese magnets whenever they're available. But here's the good news for USA Rare Earth (and the bad news for everybody else):
No matter what China says it will do today, it can always change its mind -- and we're seeing the consequences of such rethinks in Japan. As the South China Morning Post reports today, Japan is experiencing "severe" shortages of rare-earth magnets after exports were cut in March, and recovered only modestly in April.
Japanese importers are complaining loudly -- and American investors are listening.
NASDAQ: USAR
Key Data Points
What this means for USA Rare Earth stock
So long as China continues to use rare-earth exports as an economic stick that it can use to whap any country it's upset with at a given moment, the argument for making America "rare-earth independent" will remain appealing. That's good news for USA Rare Earth, which should enjoy investor support as it works to help solve the problem.
The other good news: According to analysts polled by S&P Global Market Intelligence, USA Rare Earth is getting closer to breakeven, and may earn its first profit as soon as 2028.
Fingers crossed.
