Writing in InvestorNews on October 20, 2026, critical minerals expert Jack Lifton argues that the United States government can establish the price it pays for rare earths, but cannot determine their economic value, which depends on the industrial capacity to produce qualified materials at a competitive cost. The column builds on a Financial Times commentary published on October 8, 2026, in which economist Mohamed El-Erian examines the growing willingness of the US Treasury to intervene directly in financial markets, citing the Argentine peso, American Treasury bond yields and the Japanese yen. According to Lifton's summary, El-Erian's core point is that intervention can succeed when it aligns with economic fundamentals but can fail when political objectives replace them.
Lifton applies this framework to the American effort to build a non-Chinese rare earth supply chain. He observes that the federal government is becoming an investor, lender, price guarantor and, in some cases, a preferred customer. In his view, governments can create financial incentives but cannot change the laws of chemistry, physics, engineering or economics.
He stresses that a mineral deposit is not a metal, and that its economic value depends on the cost of extraction, separation, conversion into metals and alloys, and manufacture of a product that a customer will actually buy. China dominates the commercial production and processing of rare earths. Lifton argues that the United States allowed much of its industrial infrastructure to disappear over several decades, including manufacturing capacity, experienced personnel, specialised equipment, customer relationships and accumulated operating knowledge.
Reversing that loss, he contends, requires far more than raising raw material prices or supporting the market capitalisation of companies that intend to restore what was lost. The clearest example of federal intervention cited in the column is the July 2025 agreement between the Department of Defense and MP Materials Corp. (NYSE: MP). Under a price protection agreement filed with the US Securities and Exchange Commission, a ten-year mechanism is based on US$110 per NdPr kilogram equivalent, as defined in the contract, covering eligible neodymium-praseodymium products in concentrate, oxide and metal form.
Quarterly government payments compensate MP Materials when the contractual volume-weighted benchmark falls below that threshold. After a specified production milestone associated with the 10X facility, the government is entitled to 30% of the amount by which the quarterly benchmark exceeds US$110 per NdPr kilogram equivalent, applied to eligible volumes. Lifton emphasises that this arrangement is not a universal American market price.
The government has not required every American buyer to pay US$110 per kilogram equivalent. Rather, it is a contractual financial guarantee for one producer. Nevertheless, the agreement has become a powerful reference point for investors, financiers and other rare earth companies seeking government support.
Lifton also notes that China's dominant position was not achieved through an ideal free market, having benefited from industrial policy, state-directed investment and concentrated manufacturing demand. Chinese quotations therefore cannot automatically be treated as prices that would prevail in a fully competitive global market. The real question, in his view, is whether a price floor supports a competitive industry or simply shields selected companies from the consequences of their own operating costs.
Unlike copper, aluminium or gold, rare earths are not traded in a deep, liquid and transparent international market with universally accepted exchange prices. China publishes domestic and export quotations, specialist agencies report prices, negotiated contracts are common, and Western governments are increasingly introducing supported pricing arrangements. These benchmarks are not interchangeable.
Processing costs, logistics, financing, specifications, supply security and export licensing risk all differ. Lifton argues that an American manufacturer may reasonably pay a premium for dependable non-Chinese supply, but that premium must be understood and justified. The central question is whether the buyer is paying for genuine gains in reliability, quality and delivery security, or subsidising an inefficient production system that could not otherwise survive.
In a hypothetical example, Lifton contrasts an American producer that requires US$110 per kilogram for a specified NdPr product to cover its costs with a Chinese competitor that could deliver the same specification on comparable terms for US$70. The illustrative US$40 gap could reflect the legitimate cost of maintaining a strategically independent source, but it could also reflect poor recovery rates, inefficient processing, excessive capital expenditure, low plant utilisation or an uncompetitive business model. Lifton argues that only industrial due diligence, rather than political enthusiasm, can distinguish between these explanations.
He adds that dysprosium and terbium face particular risks, given limited non-Chinese separation capacity, restricted export availability and relatively small market volumes, all of which can drive significant price volatility. Lifton also challenges the notion of mine-to-magnet integration, the idea that financing or owning every stage automatically creates a functioning industrial system. Mining, mineral beneficiation, chemical separation, oxide refining, metal reduction, alloy production, powder metallurgy, magnet manufacturing and final component qualification are distinct industrial operations, each with its own capital requirements, technological risks, economics and specialised workforce.
In his view, the supply chain should be designed backward from the ultimate customer, namely the manufacturers of automobiles, aircraft, industrial motors, electronic devices and defence systems. The column also examines who bears the costs of strategic pricing. Grants and price support payments create direct budgetary costs, while loans and equity investments carry financial risks and may generate repayments or returns, so the face value of a loan is not automatically a taxpayer cost.
Lifton points out that rare earth content can represent only a small share of the selling price of a sophisticated industrial component, so a large increase in oxide prices does not necessarily translate into a similarly large increase in the finished product. However, if tariffs, domestic content requirements, higher energy costs, higher financing costs and strategic mineral premiums are imposed together, the result could be higher costs for the American manufactured products that rely on these materials. Lifton further notes that the United States no longer manufactures many finished products containing rare earth permanent magnets, so producing magnets domestically does not automatically restore the production of motors, compressors, generators and actuators.
Project Vault, announced on February 2, 2026, adds another dimension to the debate. It is described as an independently governed public-private partnership establishing a U.S. Strategic Critical Minerals Reserve, with the Export-Import Bank of the United States (EXIM) approving a direct loan of up to US$10 billion to a structure involving original equipment manufacturers and private capital providers.
Its demand-driven design uses manufacturers' purchase commitments to guide stockpiling rather than relying solely on discretionary government purchases. Lifton acknowledges that this commercial participation matters, but cautions that financing an emergency inventory does not establish that every supplier's expansion will be economically sustainable. A stockpiling programme could also encourage excess capacity if producers mistake initial inventory purchases for a permanent increase in industrial demand.
For investors, Lifton warns that government support can lift share prices sharply, even before a company has demonstrated technical qualification or long-term profitability. Junior mining companies may incorporate higher assumed selling prices into their discounted cash flow and net present value projections without any improvement in the deposit, metallurgy, recovery rates, capital costs or operating costs. Investors should therefore distinguish between projects that are economically viable on their own merits and those that appear viable only because their financial models assume government-supported prices.
They should also verify whether support is legally committed to the company in question or merely inferred from an agreement with another party. The US$110 contractual floor for one producer does not entitle other prospective producers to the same protection. Lifton outlines a framework for US critical minerals policy.
Policymakers should first identify the specific industrial capabilities whose absence creates unacceptable national security risks. For rare earth permanent magnets, these include reliable separation of the required elements, production of metals and alloys to specification, magnet manufacturing and qualification by the industries that use the magnets. Next, they should determine which capabilities commercial demand can sustain and which will require a continuing strategic premium.
Where a premium is necessary, it should be explicit, measurable and justified by the value of the security being purchased. Government assistance should favour demonstrated technical competence, realistic capital budgets, independently verified operating costs and credible customers, rather than resource size, the promotional appeal of a business plan or the political influence of a company's sponsors. Lifton also favours supporting specialised processing companies that serve multiple customers, and he argues that reliable production in allied countries can contribute to American industrial security if contractual obligations, export policies and industrial capabilities are dependable.
Lifton's analysis extends beyond rare earths to the other materials on government critical minerals lists, including lithium, cobalt, nickel, graphite, tungsten, gallium and germanium. In his view, such lists identify potential vulnerabilities but do not establish viable markets, commercially acceptable prices or profitable industrial businesses. He concludes that the United States must clarify whether it is purchasing a temporary supply, financing a permanent industrial capability, compensating a producer for the cost of supply security, or transferring public money to enterprises that may never become commercially competitive.
As he puts it, “The government can establish the price it is willing to pay for strategic independence. Only a functioning industrial economy can determine what that independence actually costs.” The column closes with the principle that, in his words, the final lesson is to follow where value is added. Sources: InvestorNews, “The Government Can Set the Price of Rare Earths.
It Cannot Set Their Value,” by Jack Lifton, October 20, 2026. Financial Times commentary by Mohamed El-Erian, October 8, 2026. MP Materials and US Department of Defense announcement of a public-private partnership, July 2025, and the associated price protection agreement filed with the SEC.
EXIM announcement on Project Vault, February 2, 2026. IEA policy overview of the US Strategic Critical Minerals Reserve. Congressional Budget Office publication referenced in the column on fiscal consequences of federal financing.
The article reflects the views of the column's author, who is an opinion writer rather than an investment adviser.
Source: investornews.com