What are rare earth elements and why are they important?

Rare earth elements are a group of 17 metallic elements that, despite their name, are relatively abundant in the Earth's crust. What makes them "rare" is finding them in concentrations high enough for economical extraction. They're crucial because of their unique magnetic, luminescent, and electrical properties that make them essential for many modern technologies. These elements are used in everything from smartphone screens and computer hard drives to electric vehicle motors and military guidance systems. Currently, China dominates the global supply chain, which is why the U.S. government is investing heavily to develop domestic sources.

What does the Department of Defense investment in MP Materials mean?

The $400 million investment from the Department of Defense into MP Materials represents a significant strategic shift in U.S. policy. It signals that rare earth elements and other critical minerals are now considered vital for national security, not just economic interests. This funding helps MP Materials expand its mining operations and develop processing capabilities, reducing America's dependence on foreign suppliers. For investors, this government backing reduces risk and indicates long-term support for the entire sector, potentially creating a favorable environment for other U.S.-based critical minerals companies.

How do critical minerals relate to electric vehicles and renewable energy?

Critical minerals like rare earths, lithium, and cobalt are essential building blocks for the clean energy transition. Electric vehicles require powerful permanent magnets (made with rare earths) for their motors, and lithium-ion batteries for energy storage. Similarly, wind turbines use rare earth magnets to generate electricity efficiently. As countries worldwide push for greener transportation and energy production, demand for these minerals is expected to skyrocket. The International Energy Agency estimates that a typical electric car requires six times more minerals than a conventional car, and an onshore wind plant requires nine times more minerals than a gas-fired plant.

What is "onshoring" and why is it happening with critical minerals?

Onshoring refers to the process of bringing manufacturing or resource production back to domestic soil rather than relying on imports. With critical minerals, the U.S. is pursuing onshoring because of growing concerns about supply chain security and geopolitical risks. Currently, China processes approximately 85% of the world's rare earths and dominates production of many other critical minerals. This concentration creates vulnerability for industries ranging from defense to consumer electronics. The pandemic highlighted these vulnerabilities when global supply chains were disrupted, accelerating government and private sector efforts to develop domestic sources and processing capabilities for these essential materials.

15 handpicked stocks

American Rare Earth Revival

This carefully curated group of stocks focuses on companies positioned to benefit from the U.S. government's push to secure domestic supply chains for rare earths and critical minerals. These resources are essential for defense systems, electric vehicles, and advanced technologies.

Han Tan | Market Analyst

Updated 2 days ago | Published at जुलाई 11