Highlights
- Lynas Rare Earths reported an 85% profit decline due to weak global demand and persistently low rare earth prices.
- China maintains control over 85% of global rare earth refining capacity, undercutting international competitors.
- Low rare earth prices strategically benefit Chinese producers by discouraging Western supply chain investments and maintaining market dominance.
Lynas Rare Earths, one of the world’s leading rare earth producers outside of China, reported an 85% drop in profits as weak global demand and persistently low rare earth prices continue to pressure the industry. The company’s earnings have taken a significant hit due to declining prices for key materials like neodymium and praseodymium, which are essential for electric vehicles, wind turbines, and other high-tech applications.
As reported by Nikkie Asia (opens in a new tab), the rare earth market has been suffering from oversupply, slowing demand from key sectors, and price pressures exacerbated by China’s continued dominance in processing and refining. Despite ongoing efforts to expand production and diversify supply chains, Lynas and other Western rare earth miners face challenges in achieving profitability without higher commodity prices.
This steep profit decline raises concerns about the long-term sustainability of rare earth production outside China, particularly as the U.S. and its allies push for greater supply chain independence. If prices remain low, companies like Lynas may struggle to justify expansion efforts, further solidifying China’s grip on the global rare earth market.
The pressure on rare earth prices benefits Chinese state-backed rare earth producers in several key ways:
| Pressures | China Benefits |
|---|---|
| Undercutting Global Competition | China’s rare earth companies, heavily subsidized and supported by the government, can afford to operate at lower profit margins—or even at a loss—while companies like Lynas and other Western producers struggle to stay afloat. Lower prices drive out competition, ensuring China retains dominance over the global rare earth supply chain. |
| Supply Chain Control | China doesn’t just mine rare earths—it controls over 85% of global refining capacity. Even if foreign mining operations manage to extract rare earth elements, they still often rely on China for processing and separation. Low prices discourage investment in independent refining capacity outside China, reinforcing dependence on Chinese refiners. |
| Market Manipulation Power | By keeping prices low for extended periods, China can force smaller, non-state-backed competitors out of business. Once weaker producers shut down, China can tighten supply and push prices back up when it’s strategically advantageous—effectively controlling both the boom and bust cycles of the market. |
| Geopolitical Leverage | China has used rare earths as a strategic weapon in trade disputes, most notably against Japan in 2010 and threatening the U.S. during trade tensions. By maintaining its grip on the industry, China ensures that any country seeking to decouple its rare earth supply chain faces significant economic and security risks. |
| Slowing Down Western Expansion | Western governments are actively working to diversify rare earth supply chains, with projects in Australia, the U.S., and Canada gaining momentum. However, these projects require substantial upfront investment and depend on stable pricing to be profitable. Low prices discourage investors, stalling development and ensuring China retains its first-mover advantage. |
China Wins Either Way
Whether rare earth prices stay low or eventually rebound, China’s state-backed producers remain in control. They can afford short-term pain to maintain long-term dominance, while privately owned competitors—like Lynas—face financial strain and potential shutdowns. Unless Western nations subsidize and invest in their rare earth supply chains, China will continue to dictate the terms of the global rare earth industry. Message to Donald Trump—It is time to consider strategic mineral industrial policy here in the USA.
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