Shares of rare earth-focused MP Materials (NYSE:MP) rose as much as 18% in the first 90 minutes of trading on Feb. 16. Although the miner, which only came public via a blank check company in late 2020, is going to be releasing its first quarterly earnings report as a public entity on Feb. 18, there was nothing particularly special about today for MP Materials. But that doesn’t mean that nothing important happened.
As noted above, MP Materials mines rare earth metals. These materials are key ingredients in modern technology products, notably magnets. That may not sound exciting, but without the rare earth metals for which MP Materials mines, a huge number of high-tech products wouldn’t get made. That includes defense products, which is where things start to get interesting.
MP Materials’ primary mine is in the U.S. However, the vast majority of rare earth metals come from China. Over the weekend, prominent news outlets suggested that China was considering export curbs on rare earth metals as a way to apply pressure on the U.S. Even the mention that such a thing is possible exposes a major risk for the U.S. politically, economically, and defensively. It isn’t shocking to see investors jump into MP Materials given the domestic location of its assets, assuming that there will be an increase in demand from companies looking to shore up their rare earth supply chains. Although this isn’t exactly a new goal for companies the world over, it may suddenly have a newfound urgency.
Geopolitical issues can get complex and be unpredictable. Indeed, the news reports could be Chinese saber waving… or it could be much more. There’s no way to tell. However, MP Materials is well positioned to benefit if companies, and countries, start looking for supply options outside of China. That said, the stock is up an incredible 160% since its IPO just about three months ago. This probably isn’t a great choice for risk-averse investors, but more aggressive long-term investors looking to bet on growing demand for rare earth metals that don’t come from China might still want to do a deep dive.