Morgan Stanley sees rare earth supply chain building outside of China

Morgan Stanley says that while the announced U.S. and China de-escalation may remove the “severe constraints” China had put on rest of the world with its restriction controls on rare earths and permanent magnets in the short-term, the supply uncertainty around these critical components has become evident and lifted MP Materials (MP)’ strategic value. The analyst believes Europe and Asia excluding China will take this opportunity to foster the development a rare-earth, permanent magnet supply chain outside China. Recent events will increase demand for supply outside of China for permanent magnets as downstream customers look to diversify supply chains, the analyst tells investors in a research note. Morgan Stanley thinks MP Materials, as the largest U.S.-based miner of these elements, will trade at an “increasingly elevated multiple.” The firm keeps an Overweight rating on the shares with a $34 price target after U.S. and Chinese officials said they have agreed on a framework to revive the trade truce.