Can the U.S.-Ukraine Mineral Deal Spark New Opportunities for U.S. Stocks After Continued Decline?

TradingKey - Ukrainian President Volodymyr Zelenskyy sent a letter to President Donald Trump on Wednesday, stating he is ready to work under Trump's "strong leadership" and that it is "time to make things right." He specifically outlined potential content for the first phase of the peace process. 

Trump expressed gratitude for the letter, considering it a sign of easing tensions between the two leaders, noting that Zelenskyy has agreed to achieve a peace agreement. Zelenskyy is now willing to sign a mineral agreement without the security guarantees he initially sought.

Early this week, when asked if the deal was dead, Trump responded at the White House: "No, I don't think so." He described it as a "great deal for us" .

According to the well-known betting site Polymarket, participant expectations for reaching an agreement by April have risen to 76% after dropping to a low earlier in the month.

Source: Polymarket

What are the Terms of the Deal?

The agreement envisions the establishment of an "investment fund" for Ukraine's reconstruction. 

Ukrainian Prime Minister Denys Shmyhal stated that this fund will be managed on equal terms by Kyiv and Washington. Under the terms of the agreement, Ukraine will contribute 50% of future revenues from state-owned mineral resources, oil, and gas to the fund, which will be invested "to promote Ukraine's security, stability, and prosperity." 

Meanwhile, the agreement states that the U.S. government will maintain a long-term financial commitment to the development of Ukraine's stability and economic prosperity under U.S. law. 

However, the agreement has not yet been signed, and circumstances may change.

What Mineral Resources Does Ukraine Have?

The Ukrainian Geological Survey estimates that about 5% of the world's critical raw materials are located in Ukraine, which includes millions of tons of graphite reserves, one-third of Europe's lithium ores, and 7% of Europe's titanium ores. The country also possesses significant reserves of critical metals such as copper, zinc, silver, nickel, and cobalt. Ukraine has also been found to contain rare earth metals composed of 17 elements.

Source: Ukrainian Geological Survey

The U.S. Department of the Interior has identified 50 minerals of strategic importance, of which Ukraine has more than 20, particularly titanium and lithium. Titanium is crucial for aerospace manufacturing, while lithium is essential for battery technologies.

America's Reliance on Critical Minerals from China

The U.S. relies heavily on China for critical mineral supplies, which are vital resources for manufacturing electronic devices, electric vehicles, aircraft, and defense equipment. According to TD Economics, over half of the global production of the 50 critical minerals identified by the U.S. government in 2022 came from China.

Source: TD Economics

Furthermore, China almost monopolizes the refining capabilities for rare earth elements, processing 90% of them. Various sources indicate that from 2020 to 2023, Washington imported 70% of its rare earth metals from China. This has made ensuring an alternative supply from Ukraine a key component of Trump's strategic plan.

How This Mineral Deal Will Shift U.S. Stocks

Trump is attempting to compel Ukraine to negotiate a peace agreement with Russia without promising security guarantees. In response, Zelenskyy is seeking to demonstrate that a lack of security guarantees could have catastrophic consequences for Ukraine, pointing out that Putin has repeatedly violated ceasefire agreements.

Trump ultimately refuses to provide security guarantees—a scenario that currently seems more likely—the ceasefire in the Russia-Ukraine war may face significant challenges. Russia has already rejected Ukraine's request for a one-month ceasefire. As the largest arms supplier to Ukraine, U.S. military support remains significant, and defense stocks such as Lockheed Martin may still find opportunities for growth.

According to international security experts and former Ukrainian Defense Ministry official Oleksiy Melnyk, U.S. military aid currently accounts for about 30% of Ukraine's weapons and ammunition needs. Furthermore, BBC data shows that U.S. support for Ukraine accounts for 42.7%.

Source:BBC

Ukraine possesses important minerals crucial to the electric vehicle industry and other green technologies. The country has one of the largest confirmed lithium reserves in Europe (estimated at 500,000 tons) and around 20% of the world's graphite resources. 

These resources position Ukraine as a potential key player in the global electric vehicle supply chain and a desirable partner for countries seeking critical mineral resources. If an agreement is reached, it could provide important support for U.S. domestic electric vehicles and renewable energy technologies.

Ukraine also has rich reserves of rare earth metals, which are touted as critical for high-tech applications. Trump has long focused on securing rare earths. Geopolitical hawks are concerned that China is currently the world's leading supplier of materials like yttrium. Trump seeks to reshape the global rare earth supply chain to aid U.S. development in related industries.

Ryan Castillo, a rare earth expert at Canadian research and consulting firm Adamas Intelligence, states that rare earths and finished products such as rare earth magnets are considered "weaknesses for U.S. manufacturers and the defense industry," as the U.S. and its allies have yet to develop alternative sources beyond China. Washington has prioritized establishing a "sustainable mine-to-magnet supply chain." If Ukraine can be developed into an alternative source in the rare earth supply chain, the semiconductor industry may be less impacted by the U.S.-China trade war.

Rare earth separation technology companies (e.g., MP Materials) and mineral development firms may also benefit from this agreement. Under previously announced terms, the U.S. would be responsible for Ukraine's long-term development, positioning companies with rare earth separation technology and mineral development capabilities to participate in related ventures.

Ukraine previously selected Royal Dutch Shell and Chevron as partners to explore and develop two potential large shale gas fields; however, this project has faced developmental hurdles and has been shelved. If the agreement is reached, this development project may progress. The U.S. Energy Information Administration (EIA) estimated in June 2013 that Ukraine's total shale gas reserves are approximately 200 trillion cubic feet. Notably, Ukraine possesses the largest uranium reserves in Europe.

Here Are the Stocks to Watch

Semiconductor Equipment Applied Materials (AMAT): Leading supplier of wafer fabrication, thin film deposition, and etching equipment

Server & AI Acceleration NVIDIA (NVDA): GPU and AI accelerator chip supplier for servers

Electric Vehicles (EV) Tesla (TSLA): Relies on lithium, nickel, cobalt, and graphite for battery production

Battery Production & Storage Albemarle (ALB): Largest lithium producer, affected by lithium supply changes

Aerospace & Defense Boeing (BA): Relies on titanium for aerospace equipment

Mining Companies MP Materials (MP): Leading U.S. rare earth mining company

Renewable Energy Companies NextEra Energy (NEE): Wind and renewable energy technologies rely on rare earth elements