Lynas Admits Rare Earth Production’s Soaring in China

Australia's Lynas Rare Earth Company admitted that China’s market's demand for rare-earth core materials is increasing, and the output of Chinese manufacturers has soared in recent years. Analysts imply that the U.S. energy transition has limitations, and it needs to seek cooperation with the EU to improve competitiveness.

As Chinese renewable energy, automobile manufacturing, electronics and defense sectors continue to increase demand for rare earth elements (REEs), Chinese manufacturers are also accelerating the increase in production. Lynas pointed out that there are currently many smaller Chinese rare-earth manufacturers joining the market, and they also expect China’s Northern Rare Earths to reach its goal of doubling production growth within three years.

Northern Rare Earths accounts for about 60% of China's REEs production. Lynas CEO Amanda Lacaze said that the communities where it operates in Inner Mongolia are proud to be the center of the ‘rare earth universe.’ She said: "Over the years, Chinese manufacturers have truly established all stages of the supply chain value and will continue to flourish."

Lacaze said that the Chinese increase in production indicates that the market will continue to move in the direction of growth after the price of REE commodities hit a record high in March this year. However, it is worth noting that just after she made this statement, Lynas Construction's share price in the US stock market fell 1.78% to 104 US dollars as of 14:44 Hong Kong time before the deadline.

Lacaze declined to predict whether the Chinese substantial increase in its production would deter investors' confidence in the company's development prospects. She said: "This is not the first time this has happened, and there have been market behaviors that were opposite to what we expected."

The company, the largest rare earth manufacturer outside of China, said that the demand from its customers has rebounded to the level before the new crown epidemic, and only the transportation delay caused by the blockade of the Suez Canal in March hindered the company from achieving a record quarter. Sales revenue. On the basis of the average selling price of all REE materials of US$35.5 per kilogram, Lynas’ sales revenue in the first quarter of this year was US$110 million, down from US$119.4 million in the previous three months.

The new administration of US President Biden is actively promoting infrastructure projects and rejoining the Paris Agreement, aiming to reorganize the strong US supply chain to intensify market competition, and the market is increasingly concerned about the price impact of raw materials on the growth of electric vehicle demand. This may push up battery prices by 18%, doubling the cost of commodities such as cobalt and lithium.

John Kerry, Biden’s special climate envoy, said: “The development of the energy transition field is a huge economic opportunity. This is the same concept not only for the United States, but for all countries in the world. The United States is in the reorganization of the REE supply chain. Efforts are aimed at strengthening competition with China. We have the largest carbon emissions in the world, and this is why we need an energy transition."

Goldman Sachs analysts mentioned that the United States needs to meet the demand for rare earth without a global supply chain, which means that the United States needs to reach the level of large-scale production and establish a mining and production chain that may last up to 10 years. Analyst Nakano said: "The best way at the moment is to cooperate with the EU and other countries to greatly reduce our dependence on the Chinese market.

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