Rare Earth Market Overview - The rare earth stocks in the US are declining as trade tensions between the US and China ease [1] - China controls a significant portion of the rare earth supply chain, including approximately 70% of mining, 90% of processed oxides, and 93% of magnets [4] - US companies find it difficult to compete with China in the rare earth market due to cost disadvantages, with US production costs potentially being two to three times higher [5][6] Investment and Government Support - The US administration is likely to continue emphasizing investment in US-based rare earth companies, potentially through backstop measures rather than direct stakes [6][7] - Government support is considered necessary to ensure the continued development of the rare earth industry in the US [8] - Government may need to work on the demand side, potentially offering benefits to companies using domestic magnets, such as in the EV sector [14][15] Strategic Partnerships and Timelines - US companies may expedite their entry into the rare earth market by partnering with non-Chinese companies, potentially reducing the timeline to one to two years [10][11] - Without partnerships, establishing domestic rare earth production could take a minimum of two to three years [9] Risks and Mitigation - The risk remains that China could flood the market and lower prices, hindering the capitalization of US companies [12][13] - A US-China agreement to prevent market flooding is crucial, along with ensuring that end-users source from US companies [13][14] Company Picks - US Rare Earth is considered a near-term opportunity due to its acquisition of LCM (Less Common Metals) and its magnet factory in Stillwater, Oklahoma, expected to start production around year-end [16][17] - Other companies mentioned include Neo Corp, American Resources, Royalty Management, and US Antimony [15]

Industry Focus - China has employed aggressive strategies since the 1990s to establish and maintain its dominance over rare-earth minerals [1] - Rare-earth minerals are crucial for manufacturing magnets used in various products, including cars, wind turbines, and jet fighters [1]

Financial Performance - Lucid achieved its sixth consecutive record quarter in deliveries and record production in Q2 [2] - Trade policies and tariffs negatively impacted Lucid's gross margin in Q2, but the company expects it to even out for the remainder of the year [2] - Lucid's adjusted IBITDA is negative $632 million, with $4.86 billion in liquidity, expected to last until the second half of next year [8][9] Supply Chain & Raw Materials - Lucid overcame challenges related to magnet availability in Q2, securing licenses for rare earth materials for the remainder of the year [3][5] - Lucid is diversifying its raw material sourcing, including changing magnet chemistry, exploring alternative rare earth sources, and sourcing from different markets [5] - While still utilizing a global supply chain, Lucid sources a small percentage of parts for Gravity and Air from China [12][13] - Lucid is increasing its resilience by sourcing battery cells from the US, with the majority coming from the new Panasonic plant in Kansas [14] - Lucid has also secured deals with graphite suppliers to ensure raw material availability for battery cell production [15] Partnerships & Future Plans - Lucid is partnering with Uber and Neuro to develop autonomous vehicles, with plans to roll them out starting in late 2026 [6][7] - Lucid is confident in its ability to integrate autonomous driving technology into its vehicles, particularly the Gravity model [7] Capital & Funding - Lucid is funded until the second half of next year and will opportunistically raise capital if needed [9][10]

National Security Concerns & Trade Negotiations - Dependence on critical minerals and permanent magnets from China poses national security risks, especially regarding dual-use items like air chips and aerospace engine technologies [1] - The US faces a dilemma where import vulnerabilities from China's supply chains could force concessions on national security concerns [2][4] - China seeks tariff reductions, relaxation of export controls, and potentially concessions related to Taiwan [3] - The US administration may consider loosening export controls on semiconductors to maintain revenue for American companies heavily reliant on the Chinese market [12] - Technology transfer to China is a significant concern, as it can lead to China's long-term technological advancement and potential disruption of supply chains for critical goods like magnets and pharmaceuticals [6][15] Supply Chain & Manufacturing - China has a strong hold on the supply chain for rare earths and permanent magnets, impacting the defense and commercial sectors [4] - The US has domestic magnet supply chains growing, including light rare earths in California and heavy rare earths in Canada, and can reuse magnets from existing products [9][10] - Building domestic supply chains takes time, but the ability to reuse magnets provides leverage in negotiations with China [10] Trade War & Tariffs - The Trump administration aimed to maintain tariffs to pressure China, but this also adversely impacted American industries [2][21] - Reducing export controls on certain technologies like chips and commercial aircraft engines may be part of a potential deal with China [18] - China may offer increased access to its magnet market but restrict supply to the US military sector [18] - The likelihood of a lasting, reliable deal with China is questionable, given China's history of not adhering to agreements [18] - High tariffs had a significant negative impact on the Chinese economy [21]