In Trump’s speeches and now also in his actions, the need to get rid of dependence on China seems to be recurring very often. Now that the trade war has really picked up pace, one of the United States’ biggest weaknesses is its dependence on critical minerals imported from China.
I shamelessly quote the text of the Substack writer I linked.
The purpose of this thread is to discuss the development of the situation and the companies that benefit most from it.
Improving Fundamentals
Now that the trade war has begun, one of the sectors that may benefit most from it in both the short and long term are producers of critical minerals.
In the short term, the sector may get an additional boost if China expands mineral export restrictions or, in the “best” case, stops them altogether. That could be a bad situation for the global economy, but a home run for the sector.
In the longer term - assuming that trade relations between China and the United States normalize even a little, the sector’s outlook is still better than before liberation day. Now that it has become clear that China is willing to use minerals as a weapon, states are likely to further increase their support for the sector - which, of course, increases investor interest - improves financing prospects, and a snowball effect is underway. Support from states, and especially the United States, has increased even before recent events.
On February 24, Congressmen Swalwell and Reschenthaler introduce the Rare Earth Magnet Security Act (REMSA), which would provide tax incentives to producers. In practice, it would mean a $20 per kilo increase in the price of produced magnets if they are produced in the United States, and $30 per kilo if both the magnet and its manufacturing materials, the minerals, are entirely produced in the United States.
On March 21, Trump uses a presidential order (executive order) aimed at accelerating the permitting and ramp-up of new production.
The government also supports the sector with direct grants - $440 million over the past five years, so even if Trump were to give up his job for some reason, the idea would hardly suffer because both parties are behind it.
The author of the text I linked in a previous message, @MylesMcNulty, discusses the sector quite thoroughly on Twitter. A kind of @Mikko_Leivo of the sector.
Sector Stocks
The sector has a relatively small cluster of companies, tickers:
$MKA $MP $LYC $USAR #PRE #RBW
In my opinion, the first two, Mkango Resources and MP Materials, are the two most fascinating, but for different reasons.
Mkango has the highest risk/reward ratio as the company is an exploration company, but MP Materials is the only one with significant production in the United States - however, it carries its own unique risks. More on that later.
Mkango has two fascinating assets under its belt.
- Songwe Hill - a project that will soon be brought to the stock market via a SPAC.
- HPMS - technology, a mineral recycling technology that should be more efficient and cheaper than others of its kind. The technology is moving from theory to practice as the JV (Joint Venture) in which the company is a part is just ramping up production at small facilities in Britain and Germany. They will serve as pioneers for the future.
The bull case is that the facilities operate as desired, Songwe Hill SPAC rockets, as does $USAR SPAC, and by selling it or taking out a loan against it, the company can finance the construction of facilities in the United States.
MP Materials is the largest US company and has significant mining production, but also metal processing in the future. The reason why MP has performed worse than smaller companies may be that as late as 2024, up to 80% of the company’s production had to be sent to China for processing. Currently, however, the company is ramping up its “Independence Facility” - a plant aimed at reducing dependence on China.
As with Russia’s gas exports, trade agreements will probably be honored until the end, but at some point, a limit will likely be reached when China no longer accepts MP’s production.
It is somewhat uncertain how the stock would perform in that situation. If the situation were to escalate, would the minerals still underground and becoming more valuable daily be so valuable that they would compensate for the decline in revenue until US processing can be ramped up?
From a risk management perspective, it might therefore be wise to assemble a basket of several companies.
Happy research moments in the sector 
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