Rare-Earth Stocks Gain. What to Watch for Next Week.

American and Chinese officials are negotiating a trade agreement which is likely to address rare-earth exports. (Photo by PEDRO PARDO/AFP via Getty Images)

Key Points

• Rare-earth stocks rose early Friday, with MP Materials up 2.3%, USA Rare Earth climbing 3%, and Ramaco Resources gaining 0.5%.
• Aclara Resources plans to build the first heavy rare-earth separation facility in the U.S. by 2027, investing $277 million.
• The U.S. is working to reduce its reliance on China for rare earths, as China produces about 90% of the world’s refined supply.

Rare-earth stocks have had a wild couple of weeks, amid rising trade tensions. Wall Street and short sellers have also contributed to volatility. It isn’t going to stop. With President Donald Trump and Chinese leader Xi Jinping set to meet next week, investors should buckle up for more crazy trading.

The U.S. rare earth industry is on the cusp of a tremendous boom, but that doesn’t mean all stocks will benefit equally.

Shares of MP Materials, the largest producer of rare earth materials in the Western Hemisphere, rose 3.5% on Friday, while the S&P 500 and Dow Jones Industrial Average gained 0.8% and 1%, respectively. Shares of USA Rare Earth were in the green most of the day but closed down 2%. Shares of Ramaco Resources also started the day higher but closed down 3.2%.

The early gains, and rise for MP**,** belie what’s happened to the stocks lately. Coming into Friday trading, shares of all three were down almost 10% on average since China threatened new export restrictions on rare earth materials in early October.

China dominates rare earth production and processing with an estimated 85% of global refining capacity. The U.S. is keen to break the monopoly on products that go into everything from electronics to electric vehicles and fighter jets. In July, the Defense Department signed a blockbuster deal with MP that included capital, a price floor, and a guaranteed customer for new capacity.

That deal and the increased investor focus on the sector left those three stocks up an average of 233% year to date, coming into Friday, despite the recent declines.

There’s been a lot for investors to digest. Of the three, only MP generates sales. Wall Street expects 2030 operating profit to be north of $1 billion. MP is expected to lose about $100 million in 2025. Now, investors hope for government stakes in other rare earth start-ups, with the new capital de-risking projects that might never have happened.

Ramaco, for instance, is developing the Brook Mine in Wyoming. Baird analyst Ben Kallo recently launched coverage of the stock with a Buy rating and $63 price target, believing that Ramaco would eventually receive government support. Shortly after the recommendation, a short seller, who sold Ramaco shares betting the stock would fall, wrote a report questioning the viability of the Brook mine.

Ramaco didn’t respond to a request for comment about the report.

The meeting between Trump and Xi should generate more rare-earth headlines. 22V Research’s Michael Hirson and Houze Song expect China to lift its export restrictions. That could be perceived as a negative for sector shares.

“While a truce is likely….both sides are engaging in gamesmanship,” wrote the pair. “Beijing has strong confidence in its leverage over Washington, based on the deterrence effect of rare earth controls and the judgment that Xi has a much higher political pain tolerance than Trump.”

Even if a truce develops, investors shouldn’t expect rare earth development to stop in the West. The U.S. wants to reduce its dependence on rare earth, which UBS calls the “spice” of industry. The absolute volume of rare earths used globally is small, but they are essential ingredients in modern technology.

Barron’s recently suggested that sticking with MP Materials was investors’ best bet for the foreseeable future. It has sales and deals with the Defense Department. Other companies represent opportunities, too; they are simply riskier bets at this point.

Investors will see more rare earth names popping up in the coming months. Toronto-listed Aclara Resources said Friday it plans to construct the first heavy rare earths separation facility in the U.S. It is scheduled for completion in 2027, and Aclara will invest around $277 million, with the state of Louisiana providing around $46.4 million in tax incentives and grants.

Aclara doesn’t generate sales yet.

“Our Project is unique in the Western world: with direct access to our ionic clay deposits, this will be the only fully integrated heavy rare earth separation operation currently capable of producing material volumes of heavy rare earths at scale,” Aclara CEO Ramon Barua said in a statement.

Scale production is what America is after. It will get there, but there are sure to be some bumps in the road along the way.

Write to Adam Clark at adam.clark@barrons.com