Jefferies says MP Materials' stock price faces rare earth pricing challenges

Investing.com - Jefferies stated on Friday that the efforts of the United States and its allies to rebuild critical mineral supply chains are progressing, but the advancements in rare earth and lithium markets remain uneven.

By 2030, the planned capacity for neodymium-iron-boron magnets in the U.S. is approximately 50,000 tons per year, spread across about seven projects, but most of the capacity is aimed at lower-grade industrial magnets. SH-grade magnets used for automotive and wind power applications remain largely unresolved, with actual output lagging behind investment scale. MP Materials (NYSE:MP), rated “buy,” is currently conducting internal separation at Mountain Pass to produce neodymium-praseodymium oxide and build inventory while waiting for downstream construction to be fully completed after export restrictions prevented China’s Shenghe from processing its concentrate.

After lithium prices hit a mid-cycle low of about $8,000 per ton of lithium carbonate equivalent, they soared to about $25,000 per ton due to the suspension of around 27 lithium mica mines in Jiangxi, increased demand for energy storage systems, and stockpiling ahead of the Chinese New Year. Subsequently, prices fell back to about $20,000 to $21,000 per ton, reflecting weak electric vehicle sales in China and disruptions in Middle Eastern energy storage systems. Jefferies indicated that due to the lithium iron phosphate chemical system and energy storage deployment, lithium carbonate will be favored before 2030, while lithium hydroxide will continue to experience structural oversupply.

Global electric vehicle growth is expected to approach 20% year-on-year in 2025, with installed capacity for energy storage expected to reach about 300 gigawatt-hours by 2025 and double by 2030. Lithium iron phosphate is expected to account for about 70% of electric vehicle battery packs in 2025 and maintain its dominance before 2030, while lithium manganese iron phosphate will remain small in 2025 at about 20,000 to 30,000 tons, compared to lithium iron phosphate at about 2.8 million to 2.9 million tons.

The Western supply chains are being rebuilt under the impetus of policy support and capital, but at least until the end of this decade, economies of scale, pricing power, and liquidity in the fields of rare earths, lithium, and battery materials remain concentrated in China. China’s anti-involution policies have reduced the likelihood of restarting Jiangxi mines, with $18,000 to $20,000 per ton seen as the minimum sustainable price for lithium.

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