Trump and Xi Reached a Rare-Earths Deal. Why MP Materials Stock Is Rising.

U.S. President Donald Trump and Chinese President Xi Jinping held in-person talks in South Korea on Thursday and reached an agreement to defer Beijing’s rare-earth export curbs. (Getty Images)

Key Points

• The U.S. and China reach an agreement on rare-earth export controls, with China deferring tighter restrictions for one year.
• Shares of MP Materials and Ramaco Resources were higher because investors expect the U.S. to push ahead to reduce dependency on Chinese rare earths.
• China controls an estimated 85% of global rare-earth processing capacity, essential for technology, auto, and defense sectors.

Fool me once, shame on you. Fool me twice, shame on me.

At this point, China has tried to use its position in rare earth materials to manipulate U.S. policy more than a few times. The U.S. won’t play that game anymore.

MP Materials and other rare-earth stocks bobbed up and down, but were mostly higher midday, after the U.S. and China reached an agreement over export controls of the critical materials.

President Donald Trump and China’s leader Xi Jinping met for talks in South Korea and managed to resolve a number of issues between the two countries. China agreed to defer its plan to tighten export controls on rare-earth materials for a year. A Commerce Ministry spokesperson said Beijing will “study and refine specific plans” in the meantime, the state-owned news agency Xinhua reported.

A year isn’t all that long. “A one-year pause on rare earth and critical minerals restrictions from China may create some breathing room for US companies, but it doesn’t change our near-total dependence on China for these vital industrial inputs,” said SAFE, a political action group dedicated to improving U.S. self-sufficiency in critical products such as oil and rare-earth metals, in an emailed statement. “China still holds all the cards.”

China has an estimated 85% of global rare-earth processing capacity, giving it a near-monopoly in products that have become increasingly important in modern manufacturing. Rare-earth elements end up in everything from electronics to electric cars to wind turbines to jet fighters.

China built its position over many decades and has threatened export control many times in the past, including earlier this year after President Trump announced tariffs in April.

Threatened restrictions are one reason the U.S. has moved to accelerate America’s ability to produce its own rare-earth materials. In July, the Defense Department announced a blockbuster deal with MP Materials that included an equity stake, price floor, and guaranteed customer for MP’s rare-earth-magnet capacity. Since then, the government has moved to develop rare-earth materials with allies such as Japan and Australia.

The MP deal was a boon for the sector. Coming into Thursday trading, shares of MP were up 312% year to date. Shares of USA Rare Earth and Ramaco Resources were up 75% and 182%, respectively.

Cooling trade tensions between the U.S. and China, however, were essentially bad news for the stocks—or at least for traders. Coming into Wednesday trading, shares of the three were actually down 21% on average since China threatened export restrictions again in early October.

Shares were mostly higher on Thursday. MP added 1%. USA Rare Earth lost 2.1%, but Ramaco gained 2.3%. Processor NEO Performance Materials added 0.7%. The S&P 500 lost 1% while the Dow Jones Industrial Average fell 0.2%.

The stocks are mostly up for mainly two reasons. For starters, the stock market is forward-looking. The declines of the past couple of weeks reflect the deal that was announced on Thursday, but a one-year pause won’t derail America’s plans to develop more domestic rare-earth capacity.

That ship has sailed. America wants rare-earth independence. Over time, it will get it.

Write to Callum Keown at callum.keown@dowjones.com