Key Points
- U.S. rare earth stocks jumped on Thursday morning. The gains came after China announced new restrictions on the export of rare earths.
- The new rules will require export licenses for products containing Chinese rare earths.
- The move is seen as a way for China to gain leverage in its trade talks with the U.S.
- Investors are betting that the restrictions will lead to tighter supply and higher prices.
Shares of U.S.-based rare earth companies jumped in premarket trading on Thursday after China announced it is tightening its control over exports of the critical materials. The move from Beijing is seen as a potential supply shock that could drive up prices and benefit non-Chinese producers.
Critical Metals, MP Materials, and Energy Fuels all saw their stock prices rise sharply on the news. The new Chinese regulations will require any company exporting products that contain even small amounts of certain rare earths from China to obtain an export license.
Rare earths are a group of 17 elements that are essential for a wide range of modern technologies, including smartphones, electric vehicles, and advanced military hardware. China currently dominates the global supply of these materials, a fact that has become a major point of tension in its trade rivalry with the United States.
The timing of China’s announcement is significant. It comes just before President Xi Jinping and U.S. President Donald Trump are set to meet at a summit in South Korea to try to hash out a trade deal. By flexing its muscle in the rare earths market, Beijing may be trying to gain leverage in those negotiations.
For now, investors are betting that a tighter supply from China will result in higher prices and a larger market for the few rare earth producers operating outside of China.
