Why MP Materials Skyrocketed This Week

S of MP Materials (MP 0. 18%) rocketed 46. 7% this week, according to data from S&P Global Market Intelligence

MP Materials is one of only a few U. -based miners with rare earths reserves, and the only one with a fully integrated operational mine, cessing facility, and magnet-manufacturing facility in Mountain Pass, CA just outside Las Vegas

As such, the company's importance has come to the fore amid the U. -China trade war, since China is the world's dominant cessor of rare earths materials

During recent trade negotiations, China slowed shipments of rare earth materials to the U

On Thursday, the Department of Defense announced a massive investment in and long-term commitment to MP Materials

The announcement gave investors not only a high degree of certainty MP's future fit growth but also a validation of the company's strategic importance

The investment will fund a second rare earth cessing facility, which MP named the "10X facility," implying a 10x increase in output

These visions indicate that if this massive new "10X" facility isn't able to sell all its rare earths to commercial entities or if China starts to "flood the market" to drive down rare earths prices, as it has done with other commodities, the government will still pick up remaining inventory at a fair price

Image source: Getty Images

Is this deal a sign of others to come

There has always been some degree of government involvement in strategic industries; however, since high-stakes trade negotiations continue between the Administration and just every U

Trading partner, one may expect similar deals going forward with other companies

MP may be the most directly involved the government gets in any private company

However, the large tax and spending bill, subsidies, and future industry-specific incentives all have the capability to greatly affect certain "strategically important" companies and their stocks

When looking at one's portfolio, one may want to include some strategically important U. -based companies, whether they be in rare earths, other commodities, defense contractors, semiconductor manufacturers, or others

As we've seen, one announced deal has the potential to greatly move such stocks in a short amount of time -- and the current President certainly s to make "deals. " Billy Duberstein and/or his clients have no position in any of the stocks mentioned

The Motley Fool recommends MP Materials

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