Arsenals Are Running Low. The Next Race Is for Strategic Metals

According to Reuters, as reported by CNBC, the U.S. Army has virtually exhausted its stockpiles of long-range precision ATACMS and PrSM missiles during the five-month war with Iran. At the same time, inventories of Tomahawk cruise missiles, as well as Patriot and THAAD interceptors, have also declined, which, according to the report, is forcing the Pentagon to accelerate the replenishment of its arsenals.

Source: www.cnbc.com

For the strategic metals market, this publication may prove far more important than yet another military update.

Modern precision-guided missiles cannot be manufactured without reliable supplies of tungsten, neodymium, praseodymium, dysprosium, terbium, samarium, and other critical materials. These elements are used in guidance systems, servo drives, permanent magnets, and high-temperature components of modern weapons.

If Reuters' assessment is correct, the replenishment of U.S. arsenals will evolve into a multi-year investment cycle affecting the entire supply chain—from raw material extraction to the production of permanent magnets, specialty alloys, and finished components.

This conclusion becomes even more compelling when viewed alongside developments over the past several weeks.

On July 20, President Donald Trump signed an executive order that significantly tightened requirements for defense contractors using materials of Chinese origin. Contractors are now required to disclose the origin of strategic materials, demonstrate that they have genuinely searched for alternative suppliers, and present plans to eliminate prohibited supply chains. At the same time, the Department of Defense has been instructed to conduct a comprehensive review of the entire critical minerals supply system.

Source: www.andrievskii.ch

In effect, the White House has acknowledged a problem that the industry has been discussing for years: the U.S. defense industry remains dependent on Chinese supplies of rare earth elements, tungsten, graphite, antimony, and other strategic materials.

However, there is a considerable distance between acknowledging a problem and solving it.

Despite the White House's increasingly tough rhetoric and its public frustration over dependence on China, there has been little practical progress so far. New mines, processing facilities, and permanent magnet manufacturing plants cannot be built within a few months. Establishing an independent supply chain typically takes years, and in some cases, decades.

It is therefore not surprising that the stock market has already begun pricing this scenario into valuations across the sector.

Shares of companies operating in rare earths and other critical minerals have moved higher not because the risks have already been eliminated, but because investors expect accelerated government investment, expanding defense procurement, and broader support for projects capable of replacing Chinese supply. Markets, as a rule, price future cash flows rather than current conditions.

Andrievskii Verdict

In my view, the market is beginning to reprice the value of access to strategic materials, rather than focusing solely on the prospects of defense contractors themselves.

The next investment cycle is likely to be determined not by who can manufacture more missiles, but by who can secure reliable supplies of rare earth elements, tungsten, and other critical minerals.

In my opinion, this structural shift has the potential to become one of the key drivers of valuation for rare earth companies and strategic materials producers in the years ahead.

Aleksei Andrievskii | Advisory Board Member, Bendura Bank AG | Liechtenstein