• Rare earths prices fall, but largest producer outside China says demand extremely healthy
  • Lynas delivered record revenue of $327.7m in March quarter on high prices, strong NdPr production
  • Drive to replace Russian energy will boost rare earths market further

Headline rare earths prices which slid 14% in China in March and the approval of a new plant that could produce 5000tpa of the neodymium-prasedymium oxide in WA have raised concerns the market could be heading into oversupply.

Not so, says the market’s undisputed leader outside its stronghold in China, ASX-listed Lynas Rare Earths (ASX:LYC). It remains extremely bullish about the outlook for the suite of commodities used in new energy infrastructure like electric cars and wind turbines.

According to Lynas the price of NdPr, Lynas’ highest value product, dropped from US$145.4/kg in February to US$144.2/kg in March, still more than double the US$68.1/kg it traded at in the same quarter a year ago.

Speaking on a call after announcing a record quarterly result described by boss Amanda Lacaze as a “championship quarter”, the Lynas managing director attributed the recent price drop to Chinese government interventions.

“It is still significantly affected by Chinese government policy. And whilst our evidence is that greater control of the Chinese market leads to improved pricing,” Lacaze said, “at the same time, some of the rhetoric which has come out of the Chinese government is that they would see that a moderated price would be more beneficial to industry. So I think that that’s what we’ve seen just over the last month or so.”

She said the underlying price of NdPr remained supported by a strong demand outlook.

“The fundamentals will remain strong. And who would have thought that we’d be looking at US$130/kg and saying oh gosh, isn’t the price a bit soft?” she quipped.


No fear over Iluka refinery

Iluka Resources (ASX:ILU) last week announced the FID on a rare earths refinery which will open in 2025 with the backing of a loan of up to $1.25 billion from the Federal Government.

That could put up to 5000t of NdPr oxides onto the market each year from 2025, similar to Lynas’ current production profile, though Lynas’ March monthly production did hit an impressive 600t, or an annualised rate of 7200tpa.

But the prospect of rising supply in the rare earths market from both Iluka and smaller producers is of little concern to Lynas.

“We’re pleased to see the Australian critical minerals industry continuing to develop,” Lacaze said.

“I think I’ve said previously that the market is positive and there’s room for many winners. Our job is to make sure that we win more than anybody else.”

Lynas is looking to ramp up its own output by 2025, including construction of a $500 million cracking and leaching plant in Kalgoorlie that will take part of the refining process completed at its Malaysian factory onshore, close to its world class Mt Weld mine.

“I think that anytime you’re talking about a brownfields expansion it is going to be a much shorter time to market than a greenfields development,” Lacaze said.

“Particularly as people are looking at other proposed projects, when you think about our Kalgoorlie facility, you know, it has major project status with the Federal Government, lead agency status with the WA Government, really a high priority, very supported project.

“And so bearing in mind that we actually really know what we’re doing, the team who are building this plant have finessed the Malaysian plant and operated the Malaysian plant.

“Any greenfield site is going to have sort of challenges and a longer lead time than a brownfield expansion as we seek to keep pace with our customers’ demand.”


Demand from wind, EVs moving faster than supply

Lynas’ downstream VP Pol Le Roux says demand for rare earths magnets is moving much faster than supply, even as Chinese companies increase their production quotas in line with government directions.

“While I was on business trip for the last several weeks, I have confirmed that demand remains very strong for especially electric cars and wind turbines, and knowing that electric car production is a bit limited by the chip semiconductor shortage that people expect to ease in the second half of this year hopefully,” he said.

“We don’t see new supply coming up in the very short term. Meanwhile, focus for everyone in the space is to produce more because the demand is increasing very fast and will continue to do so for the next at least a year or several years.

“We will be in the tight supply situation for quite a while.”

The market for permanent magnets will be enhanced on by two key things, Le Roux said. First, the nervousness around Russian gas and energy supply will result in a drive in Europe to expand wind capacity.

Secondly, more wind farms will be built offshore using direct drive technology which has a higher concentration of magnets.

“All the world is very concerned about accelerating other resources for energy, there was a conference in Paris from the International Energy Agency and all the focus is to secure as fast as possible security of supply knowing how much gas is imported into Europe from Russia today,” Le Roux said.

“So that there is a big boost for new energy investments, including wind turbines.

“The other point is that a number of these projects are offshore. So it means that the magnet demand for wind turbines is … accelerating even faster than the overall wind turbine new projects because most of it is offshore or a great number is offshore.”


Record quarter for Lynas

Lynas posted a record quarter again in the three months to March 31, generating record sales of $262m (up from $151m in the December term) and revenue of $327.7m (up from a previous record $202.7m in the three months to December 31).

It finished with $768.4m in the bank, up from $674.2m on December 31.

But it was the company’s production numbers that really sparkled after overcoming a series of Covid waves that impacted its production in Malaysia.

Lynas delivered 4945t of rare earths oxides and 1687t of NdPr, up from 4209t and 1359t respectively.

“In the AFL in the grand final the third quarter is often known as the championship quarter,” Lacaze said.

“This is one of the quarters when one team lifts and runs with the wind behind their back to a big win.

“Often you listen to the commentators say “what a blinder of a quarter” and I have to say I can’t think of a better way to describe our third quarter than ‘what a blinder’.”



Lynas Rare Earths (ASX:LYC) share price today: