Ministry of Commerce’s latest export controls on 10 U.S. companies—three lines that move the stock market at a glance

Author: David, Trend Research

On June 22, the Ministry of Commerce issued Announcement No. 23 of 2026, listing 10 U.S. entities including Aeviox, Red Cat Holdings, MP Materials, and others into the export control list, prohibiting the export of dual-use items to them; on the same day, another 46 U.S. companies were added to the government procurement restriction list.

(Note: Dual-use items refer to goods, technologies, and services that have both civilian and military applications or can help enhance military potential.)

This marks another round of normalized countermeasures against China's rare earths since October 2025. The 10 named U.S. companies mainly focus on military industry, drones, and rare earths.

The most eye-catching names on the list are MP Materials and USA Rare Earth, both representing U.S. rare earths. China's action against them initially boosted the A-share rare earth sector: with opponents cut off, domestic companies become more scarce and valuable.

The problem is, the upstream leaders in rare earths have already surged to near their highs for the year since October last year. Is it already too late to react now?

If it is late, where should the money go?

This time, the Ministry of Commerce’s control list affects more than just the rare earth sector. The overheated rare earth stocks may still have further catalysts, and the less关注ed niche lines might still be untracked.

We attempt to sort out potential influencing clues and map them onto price levels for everyone’s reference.

Key Conclusions

① Upstream rare earth stocks in A-shares have already surged, and this control is not a new catalyst.

Northern Rare Earth is currently at 52.9 yuan, about 20% below its one-year high of 63.6 yuan; Guangsheng Nonferrous at 115 yuan and Shenghe Resources at 33.6 yuan are both close to their one-year highs. These upstream resource stocks have been rising since October last year, and the logic of “benefiting from rare earth countermeasures” has largely been priced in. This control is more of a trend confirmation for upstream rare earths rather than a new starting point for prices.

② Relatively undervalued are the downstream rare earth magnetic materials and drone industry chain.

Within the rare earth chain, the valuation of mid- and downstream segments is significantly lower than upstream:

Dadi Xiong at 30.7 yuan and Zhenghai Magnetic Materials at 13.7 yuan remain near the lower end of their one-year range, with gains lagging behind upstream resource stocks. The drone sector corresponding to Red Cat and Teal Drones in the control list is even more subdued, with near-one-year lows and limited market attention. Under the same event, the pricing progress across segments is inconsistent.

③ The named U.S. stocks may not necessarily be purely negative; verification is needed after market open.

MP Materials and USA Rare Earth are core targets in the U.S. domestic rare earth supply chain, with MP having a background of U.S. Department of Defense investment.

For such companies, U.S. export controls and American policy support are two concurrent forces, possibly affecting directions differently. All three stocks were not at lows before the announcement, and since the announcement was made on Monday before U.S. markets opened, their true pricing response remains to be seen. Investors holding related positions should focus on the post-open trend.

Why do export controls benefit domestic rare earths?

Many find this counterintuitive: banning exports, isn’t that less business for Chinese companies? How can it be a positive?

The key is the direction of the controls. This time, the ban targets Chinese exports of rare earth-related items to those 10 U.S. companies, cutting off their supply sources, not affecting Chinese manufacturers’ raw material procurement.

China’s rare earth industry—from mining, smelting, separation to magnetic material manufacturing—is the most complete global supply chain, self-sufficient and not reliant on U.S. imports. In other words, this announcement does not impact Chinese upstream suppliers—they should continue production and exports as usual.

The real bottleneck is on the U.S. side.

MP Materials and USA Rare Earth aim to bypass Chinese supply chains, but they still rely on Chinese separation technology, equipment, and some intermediate materials. When opponents are squeezed, it effectively raises the scarcity and bargaining power of Chinese manufacturers in the global rare earth landscape. This market interpretation is the real reason behind the positive outlook for A-share rare earth stocks.

Upstream rare earth stocks have already surged, but funds haven’t yet flowed downstream

Let’s clarify the chain. Rare earths are mined, then processed into oxides like praseodymium-neodymium, which is the upstream stage, handled by Northern Rare Earth, Guangsheng Nonferrous, Shenghe Resources.

The raw materials are further processed into NdFeB permanent magnets and assembled into various motors, which is the mid- and downstream stage, represented by Jinli Permanent Magnet, Zhenghai Magnetic Materials, Dadi Xiong.

Upstream sells raw materials; downstream sells magnetic materials.

In this round of market, funds mainly flowed into upstream. Northern Rare Earth at 52.9 yuan, Guangsheng Nonferrous at 115 yuan, Shenghe Resources at 33.6 yuan—all close to their one-year highs. The logic is straightforward: every time the strategic importance of rare earths is emphasized, the first beneficiaries are upstream companies with mines and smelting capacity, whose scarcity is tangible.

This control event, in my view, is a positive for upstream, but the prices have largely priced in this expectation. Entering now is more like high-level relay trading, with limited upside.

Downstream magnetic materials are significantly slower in price adjustment.

Among the three major magnetic material leaders, Jinli Permanent Magnet with 7.7 billion revenue and doubled net profit in 2025 has already risen over 90%, positioning not low; but Zhenghai Magnetic Materials and Dadi Xiong are still at the lower end of their one-year range, lagging behind upstream gains.

Here’s an overlooked background:

Since the second half of 2025, China has relaxed its export controls on magnetic materials to the U.S., e.g., Jinli Permanent Magnet’s annual US sales of 500 million yuan, up 40%; Zhenghai and Dadi Xiong also obtained export licenses. The recent addition of 10 companies to the control list is a targeted move within the framework of “allowing normal commercial clients and selectively cutting off specific military entities,” not a comprehensive embargo.

Therefore, the impact on magnetic material companies’ financials is limited.

The 10 U.S. companies named are not major clients of these companies; Jinli Permanent Magnet and Zhenghai Magnetic Materials’ main revenues come from new energy vehicles and robotics motors, not significantly related to U.S. military exports.

This control mainly boosts sector sentiment rather than generating actual orders. However, I believe the real focus in the downstream rare earth chain should be on which companies’ businesses are aligned with the military theme of this list.

In this regard, Dadi Xiong is more aligned than the other two.

Dadi Xiong is a smaller company, with 1.6 billion yuan revenue and 57.4 million net profit in 2025, but it is a major supplier of domestic military magnetic materials, with a market share over 40%, used in aerospace engines, missiles, and similar equipment—directly related to the military and drone U.S. companies on the list, making it the most directly connected narrative to this event.

However, narrative alignment does not guarantee safety: its gross margin is only 18%, and its debt ratio approaches 60%, making its profitability and financial cushion weaker than peers. Plus, its small size means its stock price can rise quickly but also fall sharply.

Suitable for investors who can tolerate volatility and prioritize “pure theme,” but not for ballast.

Zhenghai Magnetic Materials is a different case. Its net profit doubled over 2025, with a stronger reversal than Dadi Xiong, driven mainly by robotics and new energy vehicle motors, with little relation to this military list. Its low valuation is more due to the market not fully pricing in the robotics story.

Thus, in the rare earth chain, upstream and downstream face two different situations.

Upstream holds resources and scarcity, with prices already reflecting the benefits, now at high levels; downstream magnetic materials are still low, with Dadi Xiong more aligned with the military list, but at a cost of small size and weaker finances; Zhenghai Magnetic is cheap but less related.

Drones: the list touches this segment, but no direct benefit

Red Cat Holdings and its subsidiary Tiler Drones in the U.S. produce military reconnaissance and attack drones, exactly the type of military drone suppliers the U.S. aims to support and replace Chinese products.

Market sentiment may link this to the A-share military drone sector, but the logic of benefits here is probably different from rare earths. It’s unlikely to generate orders for a Chinese drone company; rather, it highlights the “U.S.-China competition in military drones,” prompting the market to refocus on the strategic value and military trade competitiveness of domestically produced military drones.

Looking for corresponding A-share targets along this line, the most relevant is China UAV.

China UAV is the leader in large military drones domestically, with the Wing Loong series of reconnaissance and strike drones as core products. Drone systems account for over 90% of its main revenue, mainly exported via military trade, and are the main models for China’s military drone exports.

In terms of business relevance, it is indeed on the same track as the U.S. drone companies on the list, with the highest relatedness.

Its current price is 44 yuan, at the low end of the one-year range, but this level is a pullback from a high point, not an uninitiated position.

2025 financials show that the company’s performance surged with military trade orders, with revenue tripling in the first three quarters, and the stock once reached 48 yuan. The current decline is more like a cooling after realization.

Note that military trade revenue heavily depends on large single orders; in 2024, revenue declined 70% year-over-year and turned to loss, but rebounded strongly in 2025. This boom-bust pattern means that judging its cheapness based on price alone is unreliable; the real variable is the signing and delivery pace of future military trade orders. Valuation-wise, the company’s P/E ratio has long been in the dozens, so it’s not undervalued.

Export restrictions are not necessarily entirely negative for U.S. stocks

This is what investors holding related U.S. stocks care most about, and the answer may differ from intuition: not necessarily.

The most significant stocks in the control list, MP Materials and USA Rare Earth, are core players in the U.S. effort to reduce dependence on Chinese rare earths. MP is the only large-scale vertically integrated rare earth supplier in the U.S., with U.S. Department of Defense investment in 2025, making it a national strategic supporter. This status puts it in a dual position:

China cuts off its access to dual-use items from China, but due to supply chain security considerations, the U.S. government might give it more orders and subsidies.

Pre-announcement prices also support this view. Before the control news, MP, USA Rare Earth, and Red Cat Holdings were not at lows; the market did not pre-sell them as victims of sanctions, and investors had not priced them as such.

Of course, the final outcome depends on market reactions after opening. Since the announcement was made on Monday before U.S. markets opened, whether sanctions are seen as purely negative or as supportive expectations will be revealed through trading after the open.

Note: This article is a compilation of information and analysis, with stocks, ratings, and target prices sourced from public information and current as of publication. It does not constitute investment advice. Markets carry risks; decisions should be made independently.