Highlights
- DoD guarantees MP Materials $110/kg for neodymium and praseodymium, potentially attracting Western investment in rare earth production.
- Despite the strategic pricing deal, the U.S. remains far behind China, which controls 85% of global rare earth processing and 90% of magnet production.
- The agreement is a step forward but not a breakthrough, with the U.S. still lacking midstream capacity, diversified feedstock, and a closed-loop ecosystem.
We have established a floor—at least for one company, but have we moved a mountain?
Eric Onstad via Reuters (opens in a new tab) reports with enthusiasm on the U.S. Department of Defense’s new pricing agreement with MP Materials, framing it as a potential industry game-changer. As Rare Earth Exchanges (REEx) has reported, the DoD will guarantee MP a price of $110/kg for neodymium and praseodymium—nearly double the current China-set spot price. In return, the U.S. gets long-term supply and a magnet facility in Texas. However, while the article rightly highlights the urgency of breaking China's grip, it veers toward premature celebration, overlooking the substantial gap between price policy and genuine industrial independence.
Facts in Focus: What the Article Gets Right
The core facts are solid: MP Materials is the only fully operational rare earth miner in the U.S., and its move into magnet production is critical. Chinese price suppression has long discouraged Western investment. Guaranteeing a price floor is indeed a novel way to attract capital and send a signal to the market.
The deal’s structure—subsidizing below-floor pricing while clawing back profits if prices exceed $110—is clever. It gives MP a predictable cash flow while avoiding runaway government overpayment. The surge in optimism from miners like Aclara and processors like Solvay is real, if not universal.
The Hype Problem: One Policy Doesn’t Build a Supply Chain
What the Reuters article glosses over is that the U.S. is still a long way from catching China, which controls 85% of global rare earth processing and over 90% of magnet production. Maybe MP’s eventual 10,000-ton/year output could possibly match current U.S. demand—but not the 30,000+ tons embedded in imported finished goods, nor the exponential growth forecast for 2030s defense, EV, and AI markets.
There's also the matter of scaling. MP’s magnet production hasn’t begun. Most non-Chinese magnet makers still rely on Chinese-processed oxides. And it remains unclear whether auto and electronics OEMs—price-sensitive and globally diversified—will adopt a U.S.-centric premium pricing system. Investors must understand that so much is up in the air, and must unfold.
Bottom Line: A Step Forward, Not a Breakthrough
The DoD-MP deal is an important signal. But calling it a “new center of gravity” is a stretch. The U.S. still lacks midstream capacity, diversified feedstock, and a closed-loop ecosystem. Until those pieces are in place, price floors are policy band-aids—not strategy. REEx will continue to push for more comprehensive industrial policy in the interim.
You’re right to push back on the hype, but the article does risk feeding the “China will always dominate” narrative—which suits a number of market participants just fine. It reinforces the inertia.
It also plays into the broader view that if something doesn’t fit neatly within the bonus cycle or investment horizon of Western capital, it’s dismissed—not as impractical, but as offering no immediate or visible benefit, and therefore no interest.
The arbitrage between Chinese export pricing and Western market pricing continues to benefit intermediaries, who have little incentive to see the status quo change. Many of them are also quite vocal in offering commentary that implies it’s pointless to even try to compete.
Of course, the DoD price floor is just a small step. But it’s a meaningful one. No one expects this to be resolved overnight—supply chains take years to rebuild. But if you want private capital to engage, you need to make the economics viable—and this is a start.
Chinese supply will need to be carefully managed in the meantime. And in truth, it’s in China’s interest that the West begins to reduce its dependence—domestic demand is accelerating and will eventually consume more of their own production.
The real question is whether there’s the political will to follow through. When the U.S. commits to something, it can move at speed. Between March and December 1943, it was building three Liberty ships a day. A different context, of course—but the principle stands. If rare earth independence is truly seen as a national priority, that will become clear from the actions that follow.
Ian — thank you for this incisive and nuanced comment.
You’re absolutely right to call out the risk of reinforcing defeatist narratives under the guise of realism. At Rare Earth Exchanges, our aim isn’t to concede inevitability to China’s dominance, but to clarify where the structural misalignments still are—and how market design, policy, and capital allocation must adapt to correct them. In fact we were launched to accelerate the ex-China market. And the only way to do that is to sharpen up our thinking, our markets and our industrial policy.
Your point about Western capital’s short-termism is especially important. Too often, critical minerals policy is filtered through a quarterly lens—if it doesn’t offer an immediate ROI or a path to liquidity, it gets labeled “not investable.” Meanwhile, China is thinking in terms of decades and national systems—not exits. Until this mindset shifts, pricing interventions like the DoD floor will remain Band-Aids over a deeper fracture.
We also agree that intermediaries have little incentive to disrupt the arbitrage game. These are powerful incumbents who benefit from opacity, fragmentation, and dependency. They may talk about “market efficiency,” but in reality, they profit from systemic inefficiencies—and some even act as informal gatekeepers for Chinese material.
You’re spot-on to reference wartime industrial mobilization as a metaphor. Liberty ships weren’t just a feat of engineering—they were proof of what’s possible when the U.S. treats industrial output as a matter of national security. The question now is: will we build “Liberty Magnets”?
Thanks again for advancing the discussion. We’d welcome your continued insights as this landscape evolves.
—The Rare Earth Exchanges Team