Pentagon Guarantees $110/kg Floor Price for Rare Earths in Major Push to Counter China

Washington D.C. – The U.S. Department of Defense (DoD) has made a significant move to bolster domestic rare earth production, investing $400 million in MP Materials and guaranteeing a minimum price of $110 per kilogram for key rare earth elements. This strategic financial commitment, which makes the DoD the largest shareholder in America's biggest rare-earth producer, aims to reduce the nation's reliance on China, which currently dominates the global supply chain for these critical minerals. The development was highlighted by Jon Hartley, who tweeted, > "America’s Biggest Rare-Earth Producer Makes a Play to End China’s Dominance" via @WSJ.

The DoD's investment is coupled with a crucial floor price mechanism for neodymium and praseodymium, set at nearly double the current Chinese market rate. This unprecedented step is designed to de-risk investments and incentivize domestic production, addressing a long-standing challenge where low prices set by China have stifled competition. Industry analysts suggest this new pricing system could become a baseline for rare earth economics outside of China, stimulating further investments across the supply chain.

MP Materials, which operates the only active rare earth mine in the U.S. at Mountain Pass, California, is set to significantly expand its capabilities. The company plans to build a second magnet manufacturing facility, dubbed the "10X Facility," targeting an annual output of 10,000 metric tons by 2028. This expansion, supported by $1 billion in commercial debt from JPMorgan Chase and Goldman Sachs, will complement its existing Texas facility, which is expected to begin commercial magnet production by year-end.

Further solidifying the domestic supply chain, Apple Inc. announced a $500 million investment in MP Materials to secure a U.S.-based supply of rare-earth magnets for its products. This multi-year agreement includes plans for a new magnet manufacturing plant in Texas and a recycling facility near Mountain Pass, with initial shipments to Apple anticipated by 2027. This move aligns with Apple's broader strategy to diversify its supply chain and reduce dependence on Chinese imports.

The push for domestic rare earth independence comes amid escalating geopolitical tensions, with China having previously imposed export restrictions on these vital materials. Rare earth elements are essential for high-performance magnets used in a wide array of technologies, including military hardware like F-35 warplanes, electric vehicles, wind turbines, and consumer electronics. MP Materials ceased sending its rare earth concentrate to China for processing in April, further underscoring the shift towards a fully integrated U.S. supply chain.