MP Materials: Cornerstone of U.S. Rare Earth Independence

The rare earth metals market is no longer a niche sector. With electric vehicles, wind turbines, and advanced robotics driving demand for high-strength permanent magnets, the race to secure domestic supply chains has intensified. At the center of this transformation is MP Materials Corp. (NYSE: MP), operator of the Mountain Pass mine—the sole rare earth production facility in the U.S. Over the past five years, MP has emerged as a critical player in Washington's push to reduce reliance on Chinese imports, but its journey is fraught with geopolitical risks and industrial-scale challenges. Here's why investors should pay close attention.

A Strategic Pivot to Magnets
MP's recent moves underscore a bold shift beyond raw material mining. In 2021, the company inked a landmark deal with General Motors to supply neodymium-iron-boron magnets for EV motors, simultaneously breaking ground on a $100 million magnet plant in Fort Worth, Texas. This vertical integration—expanding from ore extraction to finished magnet production—is central to MP's vision of a “full supply chain solution.” The strategy aligns with U.S. government priorities: in May 2024, the Biden administration imposed a 25% tariff on Chinese rare earth magnets, set to take effect in 2026.

The tariff decision marks a turning point. reveals a 35% surge in the year following the announcement, suggesting investors see MP as a prime beneficiary of reduced Chinese competition. However, execution remains key. MP must scale magnet production while navigating complex logistics, such as securing enough neodymium and praseodymium (the critical rare earth elements) to meet demand.

Government Backing and Operational Momentum
MP's progress is bolstered by federal support. Since 2020, the company has secured over $45 million in grants from the Department of Defense and Energy, including funding to process rare earths from coal by-products—a promising avenue to diversify supply. Operationally, MP has advanced its three-phase Mountain Pass expansion, completing Stage I (mining and crushing) by 2024 and progressing into Stage II (milling and flotation). Full-scale magnet production, expected by 2026, would position MP to capitalize on the tariff timeline.

Yet risks linger. China, which dominates global rare earth processing, retains significant cost advantages. MP's reliance on U.S. labor and energy markets could narrow profit margins unless scale economies materialize. The company's Q1 2025 earnings report, due May 8, will offer critical insights into these dynamics.

Backtest the performance of MP Materials (MP) when buying on the day of quarterly earnings announcements and holding for 20 trading days, from January 2020 to June 2025.

Investor Considerations
MP's stock closed at $29.20 on June 12, 2025, up 7% in after-hours trading on optimism around Q1 results. Key catalysts ahead include:
1. Q1 Earnings: Metrics on magnet production timelines and cost efficiencies will test investor confidence. Historically, buying MP on the day of quarterly earnings announcements and holding for 20 trading days since 2020 has resulted in an average return of -30.47%, with a maximum drawdown of -82.49%. This underscores the high volatility and risk associated with the stock around earnings reports, as evidenced by the negative Sharpe ratio of -0.13 and elevated volatility of 65.26%.
2. Tariff Implementation: The 2026 deadline creates a clear timeline for MP to solidify its market position.
3. Shareholder Dynamics: Major stakeholders like JHL Capital and Shenghe Resources (a Chinese rival with a 7.7% stake) could influence strategic decisions.

For long-term investors, MP represents a bet on U.S. industrial policy outpacing geopolitical headwinds. Short-term volatility, however, is inevitable. The stock's current valuation—trading at 18x forward earnings—suggests markets already price in much of the good news.

Conclusion
MP Materials stands at the crossroads of energy transition and national security. Its success hinges on executing a complex vertical integration strategy while weathering macroeconomic pressures. For investors willing to endure near-term uncertainty, MP's role as a linchpin of domestic rare earth production offers compelling upside. But patience is required: the rare earth boom isn't just about minerals—it's about reshaping an entire supply chain from the ground up.

Nick Timiraos
June 6, 2025