Highlights
- Broker Bell Potter predicts a 50% stock drop for Lynas Rare Earths based on NdPr pricing assumptions.
- Lynas is the only scaled rare earth producer outside China with strategic importance in Western reindustrialization efforts.
- Geopolitical factors and government interventions may provide pricing support and strategic value beyond traditional financial analysis.
Broker Bell Potter (opens in a new tab) has doubled down on its Sell rating for Lynas Rare Earths (ASX: LYC), suggesting the stock could fall 50% from $15.09 to $7.65. The argument hinges on NdPr pricing assumptions: spot prices are around US$77/kg, while the market appears to be pricing in US$160/kg.
On pure discounted cash flow math, that case makes sense. But rare earths don’t trade in a vacuum, and this is where the contrarian lens matters.
A Supercycle of Demand
The West is in the early innings of what could be the largest reindustrialization push since the post-WWII era. The U.S., EU, Japan, Korea, and Australia are pouring tens of billions into reshoring clean energy, defense, and advanced manufacturing supply chains. Rare earth magnets—critical to EVs, wind turbines, fighter jets, and medical equipment—sit at the core of this rebuild.
Lynas is not just another miner; it is the only scaled producer outside China with established separation capacity and a proven supply chain. That strategic position has scarcity value that DCF spreadsheets fail to capture. Lynas is number one on the Rare Earth Exchanges Light Rare Earth Element Project Rankings; and number two on the Heavy Rare Earth Element Rankings.
Policy Floors and Strategic Premiums
Bell Potter’s math assumes market-driven NdPr prices prevail. Yet governments are already intervening. The U.S. Department of Defense has installed price floors and provided direct investments to secure domestic supply. Japan has long co-financed Lynas’ operations. Similar mechanisms may extend further, meaning Lynas could benefit from policy-supported pricing and guaranteed demand, insulating it from spot price swings.
Investor Questions the Bears Skip
- What happens to valuation when sovereign customers—not just commercial buyers—anchor offtakes?
- Could Western governments view Lynas’ survival as a matter of national security, making traditional valuation metrics less relevant?
- If a West–China decoupling accelerates, is $160/kg NdPr really an “unrealistic” assumption—or a potential baseline in a constrained market?
Bottom Line
Bell Potter may be right in the narrow sense that Lynas trades above consensus NdPr assumptions. But in the broader context of geopolitical rivalry and Western reindustrialization, strategic scarcity commands a premium. Investors betting on fundamentals alone risk missing the point: Lynas is not just priced as a company—it’s priced as an asset of strategic consequence.
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Spot price is completely dependent on China’s willingness to supply. Already it is unwilling to supply for military purposes. That makes the US military an unfulfilled buyer. Is lynas really going to politely price match China when it knows the Pentagon has no other option?