The US is stepping up domestic rare earth production with federal backing that now goes beyond grants and loans to include equity stakes, purchase agreements and price floors, including for NdPr oxide and magnets. New refining and magnet capacity is being announced, but elevated production costs are shaping how quickly different parts of the supply chain can scale.
In June 2026, the Department of Commerce agreed support for USA Rare Earth comprising $277m in direct grants and a $1.3bn senior secured loan, alongside the government taking a 16% equity stake. Separately, in 2025 the Department of Defence took a 15% stake in MP Materials, and paired it with a 10-year purchase agreement for magnets plus a 10-year price floor for neodymium-praseodymium oxide. The report describes rising output in bottleneck areas and a large pipeline of capacity, while indicating that some segments may expand faster than others.
Government Policy and Market Impacts
We see a unique trading window opening up in the rare earths sector as heavy government intervention reshapes the market. Recent massive funding injections, including billions in loans and direct equity stakes in domestic producers, are creating artificial safety nets for these critical materials. As derivative traders, we should prepare for increased volatility and price divergence between US-backed assets and global markets in the coming weeks.
The introduction of ten-year price floors for neodymium-praseodymium (NdPr) oxide fundamentally changes the risk profile for domestic producers. With the US government guaranteeing purchase prices, the downside risk for these specific equities is highly mitigated compared to global competitors. We can leverage this by looking at bullish options strategies, such as cash-secured puts or long calls, on US-based rare earth miners.
Global Competition and Trading Opportunities
China currently controls roughly 70% of global rare earth extraction and a massive 90% of magnet manufacturing, keeping global prices highly sensitive to Beijing’s export quotas. However, with domestic projects securing over $1.5 billion in federal loans and grants this year alone, US production capacity is poised to scale up. We expect this structural shift to create sharp price discrepancies, offering excellent arbitrage opportunities in the derivatives market.
In the short term, high local refining costs mean we will likely see a bottleneck in magnet production while raw mining output rises. We should focus our near-term trading strategies on volatility plays, as the market digests these uneven supply-chain expansions. Spreads between raw oxide derivatives and finished magnet contracts are particularly worth watching as these domestic facilities come online.
