Can Arnold Magnetic Technologies Reshape the Rare-Earth Supply Ecosystem?

A significant strategic collaboration between USA Rare Earth, Inc. USAR and Arnold Magnetic Technologies Corp.—a subsidiary of Compass Diversified—has emerged as a potential game-changer for Western rare-earth independence. Through USAR’s wholly-owned subsidiary, Less Common Metals (LCM), the alliance aims to create a resilient, domestically-controlled source of rare-earth materials critical for advanced magnet manufacturing. This alignment signals a broader industry shift toward decoupling from geopolitically concentrated supply chains.

The Strategic Imperative Behind the Collaboration

The partnership addresses a systemic vulnerability: traditional rare-earth supply chains remain heavily dependent on external actors. By positioning Arnold as a key recipient of premium rare-earth metals—particularly expertise in samarium cobalt, neodymium praseodymium, and related alloys—the deal creates a localized ecosystem spanning aerospace, defense, automotive, and renewable energy sectors. LCM’s acquisition by USAR in November 2025 positioned the company to execute exactly this supply-side strategy.

The collaboration extends beyond transactional arrangement. It represents a consolidation effort where strip cast alloys and magnet precursors flow through established relationships, reducing both logistical friction and geopolitical exposure. Defense contractors and manufacturing firms gain predictable sourcing, while Arnold strengthens its position as a stable supplier in the permanent magnet value chain.

Competitive Landscape: Industry Peers Charting Similar Courses

USAR is not operating in isolation. MP Materials Corp. MP has established a joint venture with the U.S. Department of War and Saudi Arabia’s Maaden to construct a rare-earth refinery in the Kingdom. This initiative leverages MP Materials’ technical capabilities to process materials for allied defense and manufacturing ecosystems, simultaneously anchoring U.S.-Saudi bilateral economic cooperation.

Similarly, Energy Fuels Inc. UUUU inked a memorandum of understanding with Vulcan Elements in August 2025 to supply rare-earth oxides—specifically NdPr and dysprosium oxides—from its White Mesa Mill operations in Utah. Energy Fuels has commercialized high-purity, non-Chinese rare-earth oxide production, directly supporting domestic magnet supply infrastructure.

Market Performance and Valuation Dynamics

USAR’s equity has appreciated 15.2% over the past six months, trailing the broader industry advance of 17.4%. However, valuation metrics reveal complexity: the stock trades at a forward P/E ratio of negative 29.59X versus an industry median of 15.82X, reflecting ongoing profitability challenges. USAR carries a Value Score designation of F.

Consensus earnings expectations for 2025 have remained stable over the preceding month, suggesting analyst confidence despite near-term volatility. The company currently holds a Zacks Rank #3 (Hold) classification.

The Takeaway: Supply Chain Resilience Over Margin Optimization

The Arnold partnership encapsulates a broader industrial strategy: building Western rare-earth capacity not purely for profit maximization, but for systemic resilience. As geopolitical competition intensifies and critical material dependencies become strategic liabilities, collaborations like USAR-Arnold represent pragmatic infrastructure investments designed to outlast commodity cycles.