The United States Department of Defense will become the largest shareholder of a company that operates the only rare earth mine in the U.S. This move is interpreted as an effort to reduce dependence on China for rare earths, which are essential for advanced military equipment development.
According to reports from The Wall Street Journal (WSJ) and CNBC on the 10th (local time), MP Materials, the largest rare earth mining company in the U.S., has entered into a contract to purchase 15% of MP preferred stock worth $400 million (approximately 550 billion won) from the Ministry of National Defense. Following the announcement of this contract, MP's stock price surged by more than 50%.
Founded in 2017, MP is headquartered in Las Vegas, Nevada. It is the only company in the U.S. that owns a rare earth mine located about 100 kilometers from Las Vegas in Mountain Pass, California. The company also has a plant in Fort Worth, Texas, producing rare earth metals and magnets.
MP stated that the Ministry of National Defense would invest billions of dollars more to promote domestic production and plans to rapidly build a rare earth magnet manufacturing facility ten times the current production capacity to reduce foreign dependence on rare earths. MP added that this contract also includes a price guarantee and a supply plan for ten years in response to global price declines due to the cheap release of rare earths from China.
WSJ noted that the Ministry of National Defense's recent actions involved entering into an unusual contract with private corporations "to weaken China’s dominance in rare earths." According to CNBC, the U.S. relied on foreign sources for nearly all of its rare earths in 2023, with 70% of that from China.
After President Donald Trump significantly increased tariffs on Chinese imports earlier this year, China retaliated by controlling the export of rare earths. Rare earth magnets are essential components not only for civilian products like automobiles and wind turbines but also for military equipment such as fighter jets, drones, submarines, and missile systems.
James Litinsky, CEO of MP, told WSJ, "This initiative is a decisive action to accelerate U.S. supply chain independence by the Trump administration," adding that "the 10,000 tons of magnets produced under this plan will be more than sufficient to meaningfully support U.S. defense and commercial demand."