J P M O R G A N North America Equity Research 14 November 2025 MP Materials Upgrade to Overweight on Underappreciated National Security Importance and Unmatched Earnings Visibility Following 3Q results (link), we update our MP Model with 10Q items and new accounting guidance for its landmark DoD deal (link), including the $110/kg NdPr price floor kicking in Oct-1. On our revised estimates and MTM pricing, we upgrade shares to Overweight with a slightly lower $74 PT for ~29% implied upside (vs. prior Neutral ...

Core Insights - The price of yttrium, a critical rare earth element, has surged nearly 1500% this year due to severe supply imbalances, highlighting the fragility of global supply chains for key materials [1][4] - Yttrium's price has reached a historical high of $126 per kilogram, while projections for the end of 2024 suggest prices may drop to below $8 [1] - The rare earth market is experiencing significant supply constraints, with ongoing trade tensions between major economies exacerbating the situation [4] Supply Chain Dynamics - The reliance on a single source for over 90% of U.S. yttrium imports has rendered the supply chain particularly vulnerable to disruptions [4] - Western producers are ramping up efforts to address supply shortages, but short-term solutions are unlikely to fill the gap [4] - MP Materials Corp., supported by the Pentagon, is extracting yttrium at its Mountain Pass project but is currently stockpiling materials for future expansion rather than supplying the market [4] Production Expansion Efforts - Lynas Rare Earths Ltd. in Australia is increasing production capacity at its Mount Weld mine and processing plant in Malaysia to boost yttrium output [5] - The establishment of a diversified rare earth supply chain is expected to take time, indicating ongoing challenges in meeting demand [5]

Rare Earth Export Restrictions & Impact - China has halted yttrium exports to the US after April, a key rare earth element [1] - Global yttrium exports from China have decreased by approximately 30% [1] US Dependence & Stockpile Depletion - Before export controls, the US imported 93% of its yttrium directly from China [2] - US industry stockpiles of yttrium have significantly decreased, with one trader reporting a drop from 200 tons to 5 tons [2] - US yttrium stockpiles are estimated to last between 1 to 12 months of consumption [2] Yttrium Applications & Strategic Importance - Yttrium is crucial for high-temperature superconductors, jet engines, advanced coatings, missile systems, lasers, and specialized ceramics [1] - The US is reliant on China for rare earth elements like yttrium [2]

🇺🇸 BESSENT: A U.S.– China rare earths deal may land by Thanksgiving. https://t.co/VRvKlsB5Jw ...

Core Viewpoint - The narrative of "rare earth threats" may be exaggerated, as China relies on imported rare earth alloys while the value of rare earth alloy exports from Europe and the US far exceeds that of imported rare earth elements [1][3][5] Group 1: Dependency Analysis - Foreign countries depend on China's rare earth elements, but China is more dependent on foreign rare earth alloys [3][5] - In 2022, the EU imported approximately $7.5 million worth of refined rare earth elements, with two-thirds coming from China, while the EU's imports of rare earth alloys exceeded $100 million, with only 30% sourced from China [5][7] - The US imported 90% of its rare earth elements from China in 2024, but the total value was only $25 million, while exporting $190 million worth of rare earth alloys to China [5][7] Group 2: Supply Chain Dynamics - China imports about $1.4 billion worth of rare earth alloys annually, while its exports of rare earth elements are only around $400 million [7][9] - The US has been rapidly integrating its rare earth supply chain, with USA Rare Earth acquiring UK-based LCM to enhance its supply chain capabilities [8][9] Group 3: Technological Advancements - Western countries are making significant advancements in rare earth refining and alternative technologies, aiming to break China's monopoly on refining 60%-90% of different rare earth elements by 2025 [16][19] - Innovations include bio-based extraction methods, advanced separation technologies, and recycling techniques, which are expected to enhance local processing capabilities and reduce reliance on Chinese supplies [16][19][21] Group 4: Historical Context and Future Implications - Historical attempts by China to use rare earths as a trade tool through export quotas led to short-term price spikes but ultimately resulted in decreased demand as Western industries sought alternatives [27][29] - The current landscape indicates that while China maintains an advantage in primary processing, it is losing ground in the more valuable downstream products like rare earth alloys and magnets [27][29]

Group 1 - The article provides a market analysis focusing on MP Materials Corp and USA Rare Earth Inc, highlighting their roles in the rare earth materials sector [1] - It discusses the increasing demand for rare earth elements driven by technological advancements and the transition to renewable energy [1] - The analysis indicates that MP Materials Corp has seen significant growth in revenue, reporting a year-over-year increase of 50% [1] Group 2 - USA Rare Earth Inc is positioned to benefit from the growing market, with plans to expand its production capabilities [1] - The article notes that both companies are crucial in reducing reliance on foreign sources of rare earth materials, particularly from China [1] - It emphasizes the strategic importance of rare earth elements in various industries, including electric vehicles and electronics [1]

Summary of MP Materials Conference Call - November 12, 2025 Company Overview - **Company**: MP Materials (NYSE: MP) - **Industry**: Rare Earths Key Points and Arguments Partnership with the Department of Defense - MP Materials has established a landmark deal with the Department of Defense, highlighting its vertical integration strategy since 2017, which includes mining, refining, and magnet production [4][6][8] - The company has invested $1 billion in building a domestic supply chain for rare earths, addressing supply chain security concerns related to China [6][7] - The deal is seen as a recognition of MP's capability to produce at scale across the entire supply chain, from raw materials to finished magnets [5][8] Project Updates and Timelines - The heavy rare earth separation circuit at Mountain Pass is expected to be commissioned by mid-2026, designed to support both internal needs and third-party feedstocks [9][10] - MP is also investing in a chloralkali facility to enhance supply chain security and reduce costs [10][11] - A dedicated recycling circuit for Apple is being built to process magnet waste, with plans for rapid implementation [12] Production Capacity and Growth - MP aims to produce 10,000 tons of magnets, requiring approximately 5,000 tons of NdPr oxide, with a target run rate of 6,000 tons by the end of next year [22][23] - The company is focused on expanding its magnet production capabilities while ensuring resource availability through recycling and partnerships [23][30] Technical Execution and Risk Management - MP has learned from the failures of previous operators by adopting a stepwise approach to production, ensuring high-grade mineral concentrate before scaling up [25][27] - The company has partnered with General Motors to mitigate risks in the magnetics business, allowing for thoughtful growth [26] Market Dynamics and Strategic Positioning - The U.S. is increasingly recognizing the importance of a domestic rare earth supply chain, with MP positioned as a key player in reducing dependency on China [17][18] - The company is addressing purity requirements for rare earths by focusing on quality for demanding customers, particularly in the automotive sector [37][38] Challenges and Future Outlook - MP acknowledges the challenges of yield loss in magnet production but views it as an opportunity for vertical integration and recycling [33][34] - The company is confident in its ability to secure heavy rare earth feedstocks through partnerships, particularly with the Department of Defense [31] Additional Important Insights - The call emphasized the critical role of rare earths in various industries, including automotive and technology, and the need for a robust domestic supply chain [17][18] - MP's strategy includes not only expanding production but also enhancing recycling capabilities to meet future demand [22][23] This summary captures the essential points discussed during the conference call, reflecting MP Materials' strategic initiatives, project timelines, and market positioning within the rare earths industry.

Summary of MP Materials FY Conference Call Company Overview - MP Materials is the only fully integrated Western rare earth producer and supplier in the United States, focusing on bringing the rare earth supply chain back to the West [4][5] - The company operates the Mountain Pass mine, which is recognized as one of the best ore bodies globally for rare earths, particularly neodymium and praseodymium [5][6] Industry Context - Neodymium magnets are critical components in various applications, including electric vehicles, laptops, and HVAC systems [8] - Currently, 90% of neodymium magnets and related processing occur in China, highlighting a significant supply chain risk for the U.S. [8][11] Key Developments - The U.S. Department of Defense (DoD) has engaged with MP Materials to establish a domestic supply chain for rare earths, particularly after China imposed export restrictions [10][17] - MP Materials has secured a price floor of $110 per kilogram for NdPr oxide from the DoD, significantly higher than the market price of $55 at the time [18][20] Production and Capacity - The company aims to produce 6,000 tons of NdPr oxide annually, currently operating at about half that capacity [14][15] - MP Materials is also building a magnet production facility in Fort Worth, Texas, with initial production expected by the end of the year [5][15] Partnerships and Agreements - Significant partnerships include agreements with General Motors (GM) and Apple, with Apple expected to take a substantial portion of the production capacity [6][21] - The DoD has committed to purchasing all output from a new 7,000-ton magnet facility, ensuring a guaranteed offtake agreement [21] Financial Outlook - The company projects a minimum EBITDA profile of approximately $650 million, driven by NdPr oxide production and magnet sales [24] - MP Materials has about $2 billion in cash and $1 billion in debt, positioning it as net cash positive and fully funded for upcoming capital needs [57] Recycling Initiatives - MP Materials is developing a recycling capability in partnership with Apple, which will allow the company to reclaim valuable materials from manufacturing waste [36][37] - The recycling facility is expected to come online within the next couple of years, enhancing cost efficiency and extending the mine's life [37][38] Market Dynamics - The geopolitical landscape remains uncertain, with potential for China to reimpose export restrictions, but interest from U.S. customers in establishing a domestic supply chain continues to grow [27][28] - The company is not overly concerned about potential oversupply in the magnet market, as it is currently sold out for the next decade [54] Future Prospects - MP Materials is exploring further vertical integration and expansion opportunities, potentially moving deeper into the supply chain beyond magnet production [26][34] - The company is optimistic about securing additional offtake agreements as it ramps up production capabilities [46][51]

Core Viewpoint - The article discusses the potential for a slow-moving bull market in China, driven by a shift in global monetary policy and increased liquidity, particularly favoring Asian markets, including China and Hong Kong [2][3][6]. Group 1: Market Dynamics - The global monetary order is shifting from a strong dollar to a weak dollar, with a focus on a G-2 framework in trade negotiations between China and the US [2]. - There is a notable concentration of global actively managed money, with 56% in US assets, only 1.8% in Chinese assets, indicating a need for diversification towards Asia [6]. - The liquidity driving the current market rally is primarily influenced by central bank policies, with expectations that the Fed will maintain a supportive stance [5][4]. Group 2: Sector Opportunities - Various sectors are experiencing cycles of rotation, with technology, financials, and materials showing significant movements [7][9]. - A sustainable, slow-moving bull market is anticipated, allowing underperforming sectors to catch up [9]. - The traditional manufacturing space is expected to benefit from the "Involution" campaign, which could enhance corporate earnings and market balance by 2026 [10]. Group 3: Economic Recovery - Current inflation rates are low, with CPI around zero and expected to rise slightly to 0.5% next year, indicating a gradual recovery [15]. - Structural reforms are necessary for broader economic recovery, focusing on job creation and improving the social safety net, particularly for rural retirees [17][18]. - There is significant potential for improvement in social safety nets, which could support consumption and economic stability in China [18].

Core Viewpoint - China is contemplating a system that may impose stricter regulations on defense contractors seeking rare earth materials, as reported by The Wall Street Journal [1] Group 1 - The potential new system could complicate the procurement process for defense contractors in China [1] - This move may impact the availability of rare earth materials, which are crucial for various defense applications [1] - The decision reflects China's ongoing strategy to control its critical resources amid geopolitical tensions [1]