Highlights

• The U.S. Department of Defense invested $400 million in MP Materials through a 10-year partnership to accelerate domestic rare earth magnet supply chain development, sparking debate over government equity stakes in strategic industries.
• Democratic lawmakers question whether DoD equity investments risk distorting competition and picking winners, while officials defend the approach as a necessary response to market failure in rebuilding critical supply chains.
• With China controlling 85-90% of global rare earth processing and magnet manufacturing, the partnership represents national security policy through capital structure rather than traditional market mechanisms.

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MP Materials now sits at the center of a consequential policy debate: how far should the United States go to finance strategic supply chains?

In July 2025, the U.S. Department of Defense entered a 10-year public-private partnership with MP Materials that includes a $400 million equity investment in newly authorized Series A Preferred Stock, alongside other financial commitments detailed in company filings. The stated goal is straightforward: accelerate the build-out of a fully domestic rare earth magnet supply chain.

Is the deal perfect? Are the underlying challenges? Could there be unforeseen twists and turns in the effort to scale up a domestic rare earth supply chain? Absolutely.

And at a recent Senate Armed Services Committee hearing, Sen. Jack Reed questioned the legal foundation and fiscal structure of the arrangement, raising concerns that reliance on future appropriations could implicate the Anti-deficiency Act if Congress does not follow through.

As reported by Ashley Roque at Breaking Defense (opens in a new tab), Assistant Secretary of Defense for Industrial Base Policy Michael Cadenazzi (opens in a new tab) said the department relied on internal legal counsel and legislative affairs guidance and pledged to provide opinions to Congress. He defended the investment as a response to what he called a “failed market-based approach.”

Put plainly: Washington is taking ownership stakes because private capital has not rebuilt the U.S. magnet supply chain at the speed national security planners demand. 

Michael Cadenazzi---Pragmatic and Directionally Correct

The Strategic Reality: Structure Drives Policy

The underlying facts are not controversial and common knowledge among the Rare Earth Exchanges™ community.

China accounts for roughly 85–90% of global rare-earth output and dominates heavy rare-earth separation. Magnet manufacturing capacity remains overwhelmingly concentrated in Asia. This concentration creates leverage over pricing, availability, and downstream defense-critical technologies.

MP Materials operates Mountain Pass, the only currently operating rare earth mine of scale in the United States. The company is pursuing downstream integration, including magnet manufacturing capacity in Texas and a larger expansion initiative outlined in recent disclosures.

Rare earth economics are structurally volatile. Prices are cyclical, opaque, and susceptible to policy intervention. Western capital has repeatedly retreated during downturns. In that context, Cadenazzi’s reference to market failure reflects a structural challenge, not political theater. Rare Earth Exchanges™ credits Cadenazzi for directly addressing the hard truths about America’s severely eroded capacity in its rare earth and critical mineral supply chain.

Picking Winners — or Buying Time?

Democratic lawmakers argue that DoD equity stakes risk distorting competition by effectively backing one firm.

The concern is legitimate. Government ownership can reduce perceived financing risk and influence capital markets. And crony capitalism is a very real threat.

And at the same time, the reality of the industrial base is stark: the United States has a thin bench of mine-to-magnet operators at an industrial scale. Separation and magnet manufacturing are capital-intensive, technically demanding, and slow to replicate. The central variable is not favoritism. It is time-to-scale.

Equity in a State-Shaped Market

Equity is not an exotic policy tool in a market shaped by state power.

China’s rare earth ecosystem is structured through production quotas, industrial clustering, export controls, and coordinated downstream expansion. When upstream and midstream segments are effectively state-supported, grants and offtake agreements alone may prove insufficient to anchor long-cycle capital.

Equity signals durability. It lowers financing risk and aligns government and operator incentives around sustained build-out rather than quarter-to-quarter price swings. If the United States is competing against a state-directed supply chain, relying exclusively on conventional market signals may be strategically naïve.

Rare Earth Exchanges Take

This is national security expressed through capital structure.

The decisive question is not whether equity is ideologically pure. It is whether Congress can sustain funding, oversight, and policy stability long enough for physical capacity — not political rhetoric — to define the next phase of America’s rare earth strategy.