Why American automakers need a rare earths supply chain option, according to MP Materials CEO

MP Materials CEO James Litinksy joins Yahoo Finance Live to discuss the rare-earth materials company's deal with General Motors (GM) to manufacture magnets needed for EV engines and the supply chain outlook for industries buying into electrification.

Video Transcript

JULIE HYMAN: Rare earth minerals are a key ingredient in a lot of the technologies used today in magnets and other types of tech. And General Motors has just announced it's going to build a plant in the US in cooperation with MP Materials to supply rare earth magnets. The CEO of MP Materials, James Litinksy, is here with us now. So James, you guys have a mine on the West Coast that mines the minerals, but-- correct me if I'm wrong-- until now, you've had to then ship the minerals to China to have them finished. So this will be a new thing that everything will be able to happen in the United States. Am I understanding that correctly?

JAMES LITINKSY: Yeah, let me walk you through it. And good morning, Julie and Brian. Nice to see you on-- happy Friday. So we have a mine in Mountain Pass, California. And right now, the rare earth products that we make are shipped to China because that's where all the magnets are made. So, picked the major automaker that you know. Their only choice is predominantly a magnet made in China. Our mission in MP Materials is to bring that supply chain home. And so we are making rare materials at Mountain Pass.

And what we just announced last week with GM is that we are going to take the materials that we process at Mountain Pass, move them to a facility in Fort Worth, Texas that we will build. So this is an MP Materials magnet facility. And GM is going to be our foundational customer, as we bring the supply chain home. So it's really transformational, not just for MP, but also GM to be able to have this supply chain in the United States and to lead the way doing that, as well as the country, because we won't be reliant on a single point of failure in the supply chain for magnetics, which are so important for electrification.

BRIAN SOZZI: James, GM isn't alone here. All sorts of automakers are moving to electric. And I imagine you're going to need materials like this. Talk to us about the rare earth supply chain here in the US.

JAMES LITINKSY: Sure, so, well, rare earths for those who don't know, rare earths get made into magnetics. And the reason magnetics are so important is because regardless of how the batteries ultimately are made up and what the technology is, the energy goes to a motor. And in 90 plus percent of cases for electrification-- and this also goes not just for EVs, but wind turbines, drones, robots, there's certain military applications, the way that those motors move is with a rare earth magnet.

Right now, that industry, that supply chain is almost all in China. So whether it's, again, our major automakers or Boeing for a certain application, those magnets are made in China. And so what we're trying to do is get a supply chain option in America for American industry or western industry. And so we, as a company, are really leading the way in that. We're the second largest producer of rare earth materials in the world, by the way.

MP, as you know, we're profitable. And so we're a scale competitor. We believe we're on our way to becoming the low cost producer in the world for these materials. And so we've actually got the makings of a supply chain solution. And this magnetic steel is a movement downstream to really complete that mission of getting not just from the mine in an environmentally friendly and effective way, but then also to the finished magnet so we can provide it to our industry.

JULIE HYMAN: And again, James, forgive me for not knowing this, but is this GM agreement the first time that the end user has been the client? In other words, when you send your rare earths to China to be turned into magnets, are the magnet makers, have they been your clients, and now it's the end user that is your client, if that question makes sense?

JAMES LITINKSY: So, well, yeah, that makes total sense, and it's a great question. The end users are-- you could have a variety of clients. It could be people processing. It can be magnet makers. It could be tier one suppliers. There's different purchasers in China, but the end customer of that magnet is all the same. It's the OEM. It's in this case, GM buying it in China.

And what GM is saying is, we've got materials in the US if we-- and they've certainly shown the confidence in us to be able to provide this full solution. So instead of shipping that product to China to get processed and made into a magnet by a Chinese company, MP Materials is making a very large investment in creating this facility in the US so we can ship those materials to our new facility in Fort Worth, where we'll make the magnets and then, of course, sell them to GM and other customers across the supply chain.

JULIE HYMAN: Gotcha, and I'm also curious, you know, since we have heard a lot from the Biden administration about bringing supply chains back to the US, what kind of support you have gotten from the US government. Are there incentives built into what you're doing? Are there other kinds of support stimulus that you guys have gotten?

JAMES LITINKSY: Yeah, well, we've certainly had a great-- we have a great relationship with DOD and many other agencies of government. And the government has been very supportive. I think many people recognize that this is a critical issue for national security. The Biden administration has put out an executive order on getting this rare supply chain home.

And I think that they also appreciate that ultimately, because of the scale of what we're talking about, we're talking about the auto supply chain. Just to start, it's the single largest private employer in the country. We're talking hundreds of billions into the trillions of GDP for the end users of this stuff. We really need a private sector solution.

And so I think that they appreciate that we are, frankly, years and billions ahead of anybody else in the rare earth magnetic space. So we, at MP Materials, this has been our mission since day one. And we're going to lead the way in this. And again, it has to be a private-led solution. But certainly, their support is very helpful. And to the extent that we can continue to make investments and encourage an expansion and broadening of this supply chain, it will be great for the industry. And we obviously encourage that.

JULIE HYMAN: James, good to see you again. James Litinksy, MP Materials CEO--

JAMES LITINKSY: Thanks--

JULIE HYMAN: --thanks for being here. Appreciate it.