Pentagon invests $400 million in U.S. rare earths to reduce reliance on China

In July 2023, the Trump administration initiated a significant financial commitment to reduce U.S. dependence on Chinese rare earth supplies by investing $400 million in MP Materials Corp., the only active rare earth mine in the United States, located in Mountain Pass, California. This decision aimed to expand domestic production of rare earth magnets crucial for advanced weapons systems and various industrial technologies. The Department of Defense's investment will convert into a 15% stake in MP Materials, marking a critical step in ensuring stability in the rare earth supply chain. The investment includes a 10-year commitment to support pricing for domestically produced rare earth magnets, with the Pentagon guaranteeing the purchase of the full output from a planned magnet manufacturing facility, known as the “10X plant.” This plant is expected to begin commissioning in 2028 and will increase U.S. production capacity by an additional 10,000 metric tons annually. The funding from the Defense Department, supplemented by a broader $1 billion financing package from JPMorgan Chase and Goldman Sachs, will aid in building new manufacturing capabilities and expand processing facilities, reinforcing U.S. industrial resilience. As of 2023, approximately 70% of the rare earths used in the U.S. were imported from China. This dependence had become increasingly urgent following the deterioration in U.S.-China trade relations, during which China threatened to restrict exports of these critical materials. MP Materials had previously responded to these export limits by halting shipments to China and increasing sales to alternative markets, including the U.S., Japan, and South Korea. The urgency for developing a domestic supply chain has grown amid rising demand for rare earths essential for various industries, particularly defense. Share prices for MP Materials surged by nearly 50% following the announcement of the Defense Department’s investment, reflecting the market’s positive outlook on increasing domestic production capabilities amid ongoing geopolitical tensions with China.