JP Morgan: MP Materials (MP.US) will soon be impacted by the halt of rare earth ore exports, but this could be beneficial in the long term.

MP Materials (MP.US) fell 12% at the close on Monday after the company issued a statement last week that it would stop exporting rare earth concentrates to China in response to Chinese tariffs and export controls. The company stated that it will continue to produce and stockpile rare earth oxide concentrates as downstream neodymium praseodymium oxide production increases. Management is seeking to accelerate the separation of heavy rare earths and also increase magnet production at its new Ft. Worth facility. JPMorgan analyst Bill Peterson stated that the short-term financial impact may prove to be significant due to the growth in MP Materials' midstream and downstream businesses. He also believed that General Motors Company's ambition to become a "Western champion" could be achieved faster than expected. Peterson pointed out that rare earth concentrate sales account for 70% of MP Materials' department revenue last year, with most profit factors coming from the company's midstream and downstream businesses. The analyst wrote that the current midstream production only consumes about 50% of the rare earth oxide concentrate production, with most of the rare earth oxides being sold to Japan, South Korea, and the United States through partnerships. He believed that the possibility of shifting rare earth oxide production to other third-party facilities for processing is very low, and midstream production will take time to reach operational levels. Nevertheless, this will enable the company to continue focusing on rare earth oxides in the long term, especially with its Upstream 60K program underway. On a positive note, Peterson stated that this move will help accelerate MP Materials' position as a Western champion, including potential premium pricing opportunities.