Prediction: MP Materials' Aerospace Deal Is Just the First of Several
This latest deal could signal much more demand ahead.
Overview
Last month, MP Materials (NYSE: MP) signed an agreement to supply gadolinium oxide (a key rare-earth material found in nuclear reactor shielding on submarines and infrared sensors and electronics) to an unnamed U.S. aerospace and defense manufacturer. Management expects the contract to be worth nine figures over multiple years, with MP developing the additional separation capacity at its Mountain Pass facility in California.
Now, the company hasn't disclosed the customer or the specific size of the contract, but management described the deal as significant. And while I'm not typically keen on ambiguity, the announcement of this deal does provide some interesting intel about demand.
Details
You see, American aerospace and defense companies rely heavily on rare-earth materials for everything from aircraft and missiles to radar systems, satellites, and drones. The problem is that China controls much of the world's rare-earth processing and manufacturing capacity. That's a vulnerability the U.S. government has been trying to eliminate.
Source
Originally published at www.fool.com.