What impact will the US Department of Defence's involvement with the operator of the Mountain Pass mine, the only mine for these raw materials in the USA, have on the rare earth industry?
The US Department of Defence is buying into the country's most important producer of rare earths: This news spread like wildfire on 10 July, with the share price of the Las Vegas-based company rising by almost 60 per cent in the meantime. Specifically, the agreement stipulates that the ministry will become the largest shareholder in MP Materials and acquire almost 15 per cent of the issued shares - although these are preference shares without voting rights.
According to the Financial Times, the Pentagon has already invested over 430 million US dollars in the expansion of the US rare earth industry since 2020. What is new, however, is that the government has now also concluded a purchase agreement with MP Materials that includes a ten-year price guarantee for certain products at prices that are significantly higher than the current market level. In addition, a further supply agreement was signed for rare earth magnets, which are to be produced at the plant currently under construction in Texas. MP Materials also intends to supply the tech giant Apple with magnets made from recycled material produced there in future - the multi-million purchase agreement was announced a few days after the Pentagon's commitment.
The background to the state investment is the China's market power and the USA's current dependence on imports, which also affects the military sector. The US government is making the issue Rare earths now a matter of state. Our expert Jan Giese, Senior Manager Minor Metals and Rare Earths, assesses what this means for the industry and for Europe:
"China's state-controlled low-price strategy has distorted the global market for rare earths for years: Prices remained artificially low, markets were flooded, competitors were squeezed out. Under these conditions, it was virtually impossible for the private sector to build up refinery and magnet capacities in North America or Europe. This dominance cannot be broken without state involvement. The deal with MP Materials is therefore a strong signal from the US Department of Defence. Even if many questions remain unanswered - such as the justification for the price, the market effect of the price floor or the availability of capital for other juniors - the decision is understandable: MP is currently the only supplier with an active mine and refining capacity on US soil. This will also make the company less dependent on concentrate exports to China. The move shows once again that action is being taken in the USA and discussions are taking place in Europe. The EU is in danger of being left behind. It is to be hoped that this dynamic will now also accelerate the realisation of strategically important projects here in Germany. Financing and authorisation must be possible much more quickly, because one thing is clear: the race for critical raw materials beyond China has long since begun. Europe is still at the starting line."
Mountain Pass: America's strategic restart in rare earths
The history of the Mountain Pass Mine is regarded as a reflection of global developments in the market for rare earths. The first deposits were discovered there in 1949, and the site was the world's leading producer for a long time from the 1960s onwards. Due to significantly cheaper competition from China and increasingly strict environmental regulations in the USA, the mine was closed in 2002. After several changes of ownership, MP Materials resumed operations in 2017 with financial support from the Chinese group Shenghe Resourceswhich, however, does not exercise any operational control.
Europe follows suit, but with a different focus
Political initiatives to reduce dependency on critical raw materials are also on the rise in Europe. With the Critical Raw Materials Centre, the EU wants to create a central point of contact from 2026 to coordinate strategic stocks and monitor supply chains. An EU body such as JOGMEC in Japan, which invests in raw material extraction and processing, is still lacking. The recently presented EU draft budget for the years 2028 to 2034 does not contain any references to this, although industry representatives have repeatedly called for significantly more funding for the entire value chain. At national level, raw material funds, such as those already introduced in France and Germany, could show the way. Whether Europe can keep pace in building up its own capacities will therefore also depend on the financial strength and determination of the member states. The German raw materials fund, for example, is endowed with a total of one billion euros and is intended to support individual projects with between 50 million and 150 million euros each. This is far less than the 400 million dollars (equivalent to just under 344 million euros) that the USA is now investing in MP Materials. It remains to be seen whether European projects, or projects financed by Europe, will be able to compete.
More on the topic - other Pentagon investments
Even though the planned investment in MP Materials represents a new dimension, the US Department of Defence has been focusing on the value chains for rare earths and other critical minerals for the military sector for some time. Here are some selected articles from the industry portal Rohstoff.net on the topic:
Rare earths made in the USA: Ucore receives millions in funding from the Pentagon, 15 May 2025
Rare earths: Pentagon invests in terbium producer, 10 September 2024
Rare earths: Lynas signs updated contract for plant in Texas, 1 August 2023
US Army invests in domestic supply chain for antimony, 28 May 2025
