As China Tightens Rare Earth Exports, These 3 Stocks Are in Focus

Key Points

• China banned specific rare earth minerals for export to the United States on Dec 4, 2024.
• The United States is seeking to bolster its supply chain of rare earth elements outside of China, which supplies 95% of the rare earth elements to Europe.
• The United States has a single operating rare earth processing facility located in Mountain Pass, California.

The China rare earth minerals ban on Dec 3, 2024, was a retaliatory move aimed at diluting the United States’ efforts to accelerate certain technologies in the computer & technology sector and the aerospace sector. Namely, Chinese exports of antimony, germanium, and gallium to the United States were immediately cut off. These are materials that China has a dominant position in processing and are essential for producing semiconductors, solar panels, fiber optics, ammunition, and electric vehicles (EVs).

Currently, this is the only active and producing rare earth mine in the United States, owned by MP Materials Co. NYSE: MP. As President Trump seeks to bolster the United States supply chain of these rare earth elements, here are three stocks that can gain as demand rises for them.

Neo Performance Materials: Canadian Rare Earths Processor

Based out of Canada, Neo Performance Materials Inc. OTCMKTS: NOPMF is a rare earths producer operating in three segments: Magnequench, Chemicals and Oxides, and Rare Metals. Neo Performance is not a miner but a processor.

They source raw materials from other mining companies and process them into rare earth elements and metals.

Therein lies the problem in the United States: the processing.

Rare Earth Mining in the U.S.: The Real Challenge Lies in Processing

The processing has been the toughest part as the United States has rare earth mines like Mountain Pass in San Bernadino, Bear Lodge in Wyoming, and Round Top in Texas. Processing rare earths is a complex process involving multiple stages of separating individual rare earth elements from each other and removing impurities. It can generate hazardous waste and pollutants, causing environmental concerns as some rare earth ores contain radioactive materials. Most importantly, it can be expensive and cost-prohibitive, which is why it's common to ship rare earth ores to China for processing.

Neo Performance owns one of the only rare earth processing facilities in Europe, located in Estonia. This not only makes the United States supply chain extremely fragile, but Europe as well. Recently, France and Sweden have been constructing rare earth processing facilities and Belgium’s Solvay is aiming to supply up to 30% of Europe’s needs for permanent magnets by 2030. China is estimated to supply 95% of Europe’s rare earths.

Growing Adjusted EBITDA by 50% YoY

Neo Performance posted Q3 2024 adjusted EBITDA of $19.6 million, up 50% YoY. On a year-to-date (YTD) basis, adjusted EBITDA rose to $43.7 million compared to $34.1 million. Adjusted EBITDA YTD margin rose to 12.8%, up 510 bps from the prior year.

Neo Performance CEO Rahim Suleman commented, "Neo is pleased to report another solid quarter, with Adjusted EBITDA up approximately 50% year-over-year to $19.6 million and 30% year-to-date. This performance, driven by growth in our Magnequench and Rare Metals business units, reaffirms our business strategy and approach.” The company also raised $30 million in cash from recent asset dispositions.

Trump’s 25% Tariffs on Canada Could Be an Issue

President Trump’s intent to levy 25% tariffs on Canada and Mexico starting on Feb 1, 2025, could hinder relations. It could also raise the costs for rare earth materials entering the United States, which would further impact its supply chain.

Lynas: Rare Earths Miner and Processor Down Under

Further across the Pacific Ocean, located in Australia, is Lynas Rare Earths Ltd. OTCMKTS: LYSCF. Lynas mines, extracts and processes rare earth minerals from the Mount Weld project and Kalgoorlie project in Australia and Malaysia.

The company has been trying to expand its mines. Kalgoorlie was recently commissioned in November 2024, while mine expansion in Mount Weld is still not completed. Lynas is in the process of building a rare earth processing facility in Texas, United States, which is one way of bypassing future tariffs.

A Rough Year for Rare Earths in 2024

Despite the tensions with China, rare earth elements pricing was weak in 2024, and demand didn’t move the needle. This caused Lynas to see a sharp decline in revenues, falling to $463 million from $739 million and net profits sinking to $85 million from $311 million in 2023. However, Lynas was still profitable, earning 9 cents per share in 2024.

2025 Could Be a Volatile Year

President Trump has targeted Feb 1, 2025, as the deadline to levy 25% tariffs on Canada and Mexico and a 10% tariff on Chinese imports. As China did on Dec 4, 2025, they could again retaliate with further restrictions or bans on rare earths. Such a move would knee-jerk rare earth mineral prices higher and potentially bolster Lynas’ stock price amidst growing demand.

Pilbara: Rare Earth Potential for this Lithium Miner in Australia

While Pilbara Minerals Ltd OTCMKTS: PILBF is a major player in the lithium industry, there is rare earth mining potential.

Pilbara owns 100% interest in the Pilgangoora Lithium-Tantalium Project in Western Australia. 

It’s one of the largest hard-rock lithium deposits on the globe, producing spodumene concentrate and tantalite concentrate.

The region is known to have rare earth potential. This makes them a potential source of rare earth minerals, especially if the demand for lithium collapses due to President Trump eliminating the electric vehicle (EV) mandate in the United States.