Shares of MP Materials (MP 11.04%), a miner of rare earth metals, shot up 11% through 10:15 a.m. ET Tuesday morning after China announced restrictions on exports to the U.S. of certain products containing gallium, germanium, antimony, and "superhard materials," according to a Reuters report.
China is responding to analogous U.S. restrictions on exports to China of semiconductor chips and chipmaking technology. These new restrictions build on prior restrictions, announced in December 2023, on technology useful in manufacturing rare earth magnets.
A trade war is brewing
MP Materials is arguably America's leading producer of rare earth ore, which can be refined into rare earth metals, which can then be used to manufacture rare earth magnets (used in everything from electric car motors to wind turbines to high-tech defense products such as military drones). The company produces primarily neodymium-praseodymium (Nd-Pr) ore and metal, however, which don't appear to be the primary target of China's just-announced export restrictions -- so there's no immediate relationship between the export ban and today's spike in MP's share price.
That said, the earlier 2023 restrictions remain in place, and will continue to favor companies like MP Materials, which ensure domestic access to strategic rare earth metals. Investors are probably taking a cue from these new restrictions, interpreting them as warning shots in a trade war that may grow in size and scope under a Trump administration that has promised to impose new tariffs on Chinese exports.
Is MP Materials stock a buy?
Treating MP Materials stock as a sort of "trade war play" makes sense -- but that doesn't necessarily make MP stock a buy. Unprofitable and with more debt than cash on its balance sheet, MP is making progress scaling its operations and shifting its products higher on the value chain. Analysts, however, see MP as still more than a year away from turning a profit on its rare earths business.
Valued on 2026 estimated earnings ($0.77), the stock costs 30 times forward earnings today. At best I'd call that a speculative buy.
