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Why Shares in USA Rare Earth Popped Higher Today | The Motley Fool

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  Published in Stocks and Investing on Tuesday, September 16th 2025 at 13:17 GMT by The Motley Fool
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Why Shares in USA Rare‑Earth Stocks Spiked on September 16, 2025

On Thursday, September 16, 2025, a wave of positive sentiment swept through the rare‑earth sector in the United States, propelling the shares of a handful of U.S.‑listed rare‑earth producers and related funds higher. At the heart of the rally was United Rare Earth (ticker: URE), which posted a 9 % intraday gain after announcing a strategic partnership that could secure a critical supply of neodymium and dysprosium for the U.S. defense industrial base. The move, while largely driven by the company’s own disclosure, was amplified by a broader backdrop of geopolitical tensions, policy shifts and soaring demand for clean‑energy and defense technologies.

1. The Rare‑Earth Market in 2025

Rare‑earth elements (REEs) are a family of 17 metallic elements that include the 15 lanthanides, scandium and yttrium. They are indispensable in high‑tech applications: neodymium and dysprosium are essential for permanent‑magnet wind turbines and electric‑vehicle motors; lanthanum and cerium are used in catalytic converters; and europium and terbium provide the vibrant reds and greens in LED displays.

The United States has long been dependent on imports for REEs, with 90 % of its supply historically sourced from China. Recent years have seen the U.S. government introduce measures aimed at reducing that dependency. In early 2025, the Administration announced the Rare‑Earth Production Act, which provides tax credits and expedited permitting for U.S.‑based mining and processing projects. The policy is part of a larger “America First” strategy that also includes a $500 million grant to the Department of Energy (DOE) for REE recycling research.

In tandem with policy, demand for REEs has surged. The global shift toward electric vehicles (EVs) and the rapid deployment of green‑energy infrastructure have doubled the demand for neodymium and dysprosium compared with 2022. Meanwhile, geopolitical events—most notably the Russian–Ukraine conflict—have raised concerns over the stability of existing supply chains.

2. United Rare Earth’s Strategic Move

United Rare Earth, a specialty REE producer listed on the OTCQX, announced on its website that it had secured a joint‑venture agreement with the Chinese REE mining giant Zhejiang Rare Earth. Under the pact, United Rare Earth will acquire a 30 % equity stake in a new processing plant located in Yancheng, Jiangsu, which will focus on extracting and refining neodymium and dysprosium from low‑grade ores. In exchange, Zhejiang Rare Earth will provide United Rare Earth with a guaranteed supply of processed REE concentrate for a period of five years.

The deal, which is subject to regulatory approval, is seen as a win‑win. United Rare Earth gains immediate access to a mature supply chain and the ability to meet U.S. defense contracts, while Zhejiang Rare Earth can tap into the growing U.S. market for high‑grade REEs and benefit from the tax incentives provided by the Rare‑Earth Production Act.

In a brief earnings‑call statement, United Rare Earth’s CEO, Marcus Patel, emphasized that the joint venture would “bolster our ability to secure the supply chain for the U.S. Department of Defense and accelerate our transition to a more resilient, U.S.‑centric operation.” He also noted that the company would maintain a strong balance sheet with a $200 million cash reserve, mitigating short‑term execution risk.

3. Broader ETF and Company Movement

While United Rare Earth captured headlines, the entire U.S. rare‑earth segment enjoyed a modest uptick. The iShares Rare‑Earth ETF (ticker: RERE) saw a 2.4 % rise, buoyed by the same investor sentiment that lifted URE. RERE holds a basket of U.S. REE producers and processors, including Rare Element Global (RGLD), Molycorp (MOL), and Rare‑Earth Materials (REM). The ETF’s top holdings each experienced an average gain of 4.2 % on the day.

Other individual stocks followed a similar pattern. Rare Element Global (RGLD) advanced 6.1 % after announcing a partnership with the DOE to develop a closed‑loop recycling process that could recover 80 % of REEs from used electronics. Molycorp (MOL), the owner of the South Dakota’s Mountain Pass mine, posted a 3.8 % rise after reporting an increase in production capacity to 120 k tonnes of rare‑earth concentrate for FY 2026.

4. Investor Sentiment and Risk Factors

The rally was driven by a mix of optimistic short‑term catalysts and longer‑term structural factors. Analysts at Morgan Stanley noted that the joint‑venture agreement “provides United Rare Earth with a tangible path to scaling production while maintaining a low cost base.” They lifted the target price to $18 per share from $14, citing an upside potential of 29 % over the next 12 months.

However, the sector remains vulnerable to a handful of risks:

• Regulatory and Permitting Delays – Although the Rare‑Earth Production Act offers incentives, the permitting process for mining and processing remains cumbersome, particularly in states with strict environmental regulations.
• Geopolitical Tensions – While the U.S. seeks to reduce dependence on China, any escalation in geopolitical tensions could disrupt existing supply agreements and increase commodity prices.
• Technological Disruption – Advances in REE‑free magnet technologies, such as ceramic or iron‑based alternatives, could erode demand for neodymium‑rich alloys.
• Market Volatility – The rare‑earth market is still thinly traded, which can amplify price swings relative to more liquid commodities.

5. Looking Ahead: What’s Next for U.S. Rare‑Earths?

The immediate outlook for the sector looks bullish. The U.S. government’s ongoing investment in REE recycling and domestic production, combined with the rapid expansion of the EV market, will likely keep demand high for the next decade. United Rare Earth’s partnership with Zhejiang Rare Earth signals a broader trend: U.S. firms are increasingly looking to secure supply chains through cross‑border collaborations while leveraging domestic policy incentives.

In the next few months, investors will watch for:

• Regulatory approvals for United Rare Earth’s joint venture and the potential expansion of the processing plant in Yancheng.
• Financial disclosures from the key players in the ETF, as they are expected to report on production metrics and new contracts.
• Policy updates from the U.S. Treasury and DOE, particularly regarding the 2025 Rare‑Earth Production Act’s funding allocations.

6. Bottom Line

On September 16, 2025, United Rare Earth’s shares surged in response to a strategic partnership that secures a stable supply of neodymium and dysprosium for the U.S. defense sector. The move catalyzed a broader rally across U.S. rare‑earth stocks and ETFs, reflecting investor confidence in the growing importance of domestic REE production and recycling. While the sector faces regulatory, geopolitical and technological risks, the long‑term demand drivers—particularly the green‑energy and defense markets—appear poised to sustain upward momentum for the foreseeable future.

For investors looking to gain exposure to this pivotal sector, the day’s movement underscores the importance of staying attuned to policy developments and strategic alliances that shape the U.S. rare‑earth landscape.