After China’s Ministry of Commerce announced Tuesday that it would restrict exports of certain dual-use items containing gallium, germanium, antimony and superhard materials to the U.S, shares of MP Materials (MP), a domestic rare earth metals mining company, surged 11% as of 10:15 a.m. ET Tuesday morning and held onto the gains before market closed.
MP Materials is a leading producer of rare earth minerals in the United States. Rare earth minerals can be refined into rare earth metals, which are then used to make rare earth magnets used in high-tech defense products ranging from electric car engines to wind turbines to military drones.
The company mainly produces praseodymium neodymium (Nd-Pr) ores and metals, but these two metals are not the main targets of China’s recent-announced export restrictions on the United States, so there does not appear to be a direct relationship between this and today’s surge in the company’s share price.
Still, investors may have taken a cue from China’s latest policy, interpreting it as a signal of an escalating trade war. With the Trump administration promising to impose new tariffs on Chinese exports, the size and scope of the trade war between the two largest economies is likely to expand.
It’s not hard to understand why MP Materials’ stock is rising in a situation like today’s. But investors should be reminded that the company is not yet profitable and has more debt than cash on its balance sheet. This is despite the fact that the company is focusing on scaling its business and moving its products higher on the value chain.
However, analysts believe it will still take more than a year for the company’s rare earths business to become profitable.
Based on expected 2026 earnings of $0.77, the stock trades at 30 times forward earnings. Therefore, investors interested in this materials stock probably need to think twice.
