‘National champion’ to safeguard US industrial base
- 12 July 2025
MP Materials’ landmark deal with the US Government to accelerate expansion of an integrated domestic rare earth metal supply chain is expected to precipitate similar moves in other western countries.
“We recently highlighted the need for western governments and OEMs to support ex-China rare earths producers to help establish ex-China supply,” US investment bank Morgan Stanley said.
“US DoD’s move could drive other countries to establish their own magnet and rare earth supply chains.”
A US Department of Defense-guaranteed floor price of US$110,000 per tonne for New York Stock Exchange-listed MP’s neodymium/praseodymium, or NdPr, products used in high-performance permanent magnets from the fourth quarter of this year will “accelerate American rare earth supply chain independence”, according to MP CEO James Litinsky.
The 10-year elevated price floor coupled with a $400 million DoD equity investment and $150 million long-dated loan will enable MP to expand heavy rare earth separation capacity at its Mountain Pass operation in California and its Independence RE metal and magnetics facility in Texas. MP is also aiming to finalise a $1 billion loan deal with JPMorgan Chase and Goldman Sachs, with the US Government backing, to build a new circa-7000-tonnes-per-annum “10X” magnetics plant at a yet-to-be-chosen US site. With 3000tpa from Independence, MP will aim to produce up to 10,000tpa of magnets from the end of the decade.
“Magnets are expected to serve both defence and commercial customers,” Morgan Stanley said.
“Recent media articles showed rare earth users were already starting to look into paying premium prices for ex-China NdPr, with automakers willing to pay $80/kg including VAT, albeit significantly below the US$110/kg ex-VAT [MP will receive].
“We recently highlighted a growing need for high-performance rare earth magnets required for humanoids [robots] which could add further demand to the tune of about two-times current rare earths demand by the year 2050.
“[This would add] significant additional demand above current applications such as defence, wind and EVs.
“We also showed a lack of ex-China rare earth and magnet supply, with China accounting for 65% of mined and 88% of refined supply for rare earths.
“We saw a need for bifurcation of NdPr price or government support required in order to establish a magnet supply chain as key to reducing western reliance on China supply, with a view that supply chain vulnerabilities shown by China's recent rare earth export bans could help accelerate this.
“The US DoD's move confirms this, with the possibility other governments could follow in our view.”
The bank said key beneficiaries of bifurcated rare earths pricing and/or government support could be Australia’s Lynas Rare Earths and Iluka Resources, with the former looking to build a US DoD-funded HRE separation plant in the US and Iluka looking to start commercial production from Australia's first fully integrated RE refinery in Western Australia in 2027.
Australian Securities Exchange-listed Lynas and Iluka’s shares rose 18% and 20%, respectively, on Friday.
Jefferies analyst Mitch Ryan said the MP-US Government deal signalled “a strong US push for rare earth magnet independence, lifting upside risk across the rare earth pricing complex”.
“Lynas appears to be the next logical beneficiary of government market support,” he said in a note.
Reuters reported MP’s guaranteed $110/kg floor price “for the two most-popular rare earths” was nearly twice the current Chinese market level. MP had received an average of $52/kg for NdPr in the June quarter this year.
“The minimum price floor covers all of our NdPr containing products – concentrate, oxide and metal – and will provide for a floor price adjustment whether we are selling the product, stockpiling it or consuming it in our magnetics business,” said MP chief financial officer, Ryan Corbett.
“This minimum price floor agreement begins at the start of the fourth quarter and runs for 10 years.
“Functionally, each quarter that the market price of NdPr is below $110/kg the DoD will provide a payment to MP materials covering the difference between the market based benchmark price and $110, multiplied by the quantity of our products sold, stockpiled and or consumed. We believe this construct provides a reasonable and responsible level of minimum economics needed to properly incentivise a fully integrated domestic magnet materials supply chain at scale.
“Another important aspect of this agreement is that DoD and MP will collaborate on sourcing of heavy rare earth feedstock with Mountain Pass positioned as a refiner of choice for the western world.
“The DoD role here isn’t just about meeting its own demand. It's about catalysing the build-out of US manufacturing at scale to serve the broader US economy.
“Rare earth magnets are essential inputs to manufacture goods at the heart of our industrial base, from cars and electronics to drones and robots.
“The 10-year window of this offtake gives us the cash flow certainty and runway needed to accelerate the build out of our downstream business and realise the economies of scale necessary to establish a competitive position in the global marketplace.”
Litinsky said the Donald Trump administration backing for MP and its RE mining and downstream expansion plans would “help safeguard trillions of dollars in downstream enterprise value across American industries focused on physical AI and other dual use technologies, securing a foundation that is core to America's role as a global economic and technological leader”.
“Ultimately it reinforces MP’s role as a national champion with the scale, durability and economic firepower to lead America's re-industrialisation in this critical sector.”
