Shares in USA Rare Earth (USAR +2.79%) rose by almost 7% as of 11 a.m. today. The rebound in the stock price, and that of its peer MP Materials (MP +1.57%), comes after a sharp sell-off tied to President Trump's visit to China.
USA Rare Earth and China
According to the White House, China has agreed to address shortages of key rare-earth minerals. That tends to be bearish for rare-earth stocks, as it implies an improving relationship that will lead to lower global rare-earth prices a nd undermine the strategic necessity of the U.S. securing its own domestic supply chain of rare-earth minerals, metals, and magnets.
NASDAQ: USAR
Key Data Points
As such, the sector declined heavily over the last week, only to start bouncing back today. The reason? The reality is that it's still critically important for the U.S. strategically to secure its own supply. While the headlines may suggest a thawing in the relationship, the reality is that China is the dominant player in the rare-earth market and can exercise its leverage at any time.
A new award for USA Rare Earth
That point was reiterated this morning when the company announced it had been selected for an award of $19.3 million from the Department of Energy to help it develop a "pilot-scale rare earth element ("REE") separations project advancing domestic processing capacity for materials".
Image source: Getty Images.
As readers know, USA Rare Earth has recently taken major steps to derisk its business model, including securing a supply of rare-earth materials and access to intellectual property for separation and processing.
These moves are intended to advance its aim of commissioning the Round Top mine in 2028 so it can truly become a domestic mine-to-magnet rare-earth company. That's likely to happen, whatever the state of relations with China over rare exports is from one week to the next.
