China’s New Rare Earths Move

There are three market obsessions this week as Trump meets Xi.

1. Oil above US$100 a barrel
2. Bond yields nudging 5%
3. First Fed rate hike since 2023
4. AI Doom or Boom

But the story I think matters most is barely getting a look in.

On Thursday, Donald Trump and Xi Jinping meet at the White House.

Rare earths are on the agenda, but AI model wrangling will likely get the limelight.

My expectation is that very little of substance comes out of the meeting.

Washington has already ruled out trading away its own chip export controls in return for Chinese minerals.

And Beijing has no obvious reason to surrender the one lever that traditionally works on the Americans.

The rare earths story that broke on Friday

Reuters reported that state-owned China Rare Earth Group is in talks to acquire Shenghe Resources.

Shenghe owns around 3% of MP Materials.

That is the American rare earths stalwart in California whose largest shareholder is the US Department of War.

One of the companies Washington is backing to break China’s grip on rare earths has a Chinese shareholder on its register.

One of the main rare earth companies Gina Rinehart invested in over the last couple years…

And Beijing may be about to pull that shareholder fully under state control.

Source: Reuters

Shenghe has pushed back… so the deal is unconfirmed.

But hold on a second…

Shenghe also bought Australia’s Peak Rare Earths last year, so a consolidation of this kind would sweep up Australian ground along with everything else.

Meanwhile, in Texas, Elon’s robot army base rises from the ground…

Six months ago, Tesla broke ground on a dedicated Optimus robot factory at its Texas gigafactory.

Drone footage published on Thursday last week shows the structure taking shape:

Source: Teslarati (Via X)

It forms part of a 5.2 million square foot expansion.

Elon Musk has put the long-run target at 10 million robots a year.

Production of the robots starts in Texas next year.

And then there are the maths

Every humanoid robot needs high-torque motors, and those motors need neodymium-iron-boron magnets.

Published estimates put the magnet content at somewhere between 2 and 4.5 kilograms per robot.

You would expect the price of rare earths to be screaming.

Not yet.

NdPr oxide has been sitting around the US$110 floor the US Department of War guaranteed MP Materials under its supply agreement.

Source: MacroMicro

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So it appears the market is currently pricing rare earths as though the robot build-out were mostly a rumour.

I think that is the opportunity.

If Thursday delivers close to nothing, and I suspect it will, the case for supply chains outside China gets even stronger.

There’s still that 10 November date for tighter Chinese export controls on rare earths floating around.

And Chinese state takeover of a company sitting on the American champion’s share register makes the argument for alternative supply chains even more straightforward.

Oil, bonds and rates may dominate headlines for now.

But looking up from the immediate news to the three year horizon, in my mind, there’s no more compelling set-up than the one I’ve laid out in Elon’s Final Moonshot.

Watch Elon’s Final Moonshot, free here