Lynas Rare Earths’ role in critical minerals supply chain resilience reaffirmed by US government

About Lynas Rare Earths Limited

Lynas Rare Earths Limited (Lynas, or the Group) is the world’s second largest producer of separated Rare Earth materials and the only significant producer of scale of separated Rare Earths outside of China. Rare Earths are known as the ‘vitamins’ of manufacturing and are essential inputs to high growth global manufacturing supply chains and green technologies like electric vehicles and wind turbines. They are key enablers for technologies seeking to lower emissions, reduce energy consumption, and are a key component in technologies that make products lighter and smaller. Significantly, Rare Earth elements are also used to build fighter jets, nuclear submarines, predator unmanned aerial vehicles and smart bombs.

US Defence Production Act

Under the US Defence Production Act, Australia is classified as a domestic source of supply, alongside Canada and the UK, for critical minerals for the US. This explains why the US is providing US$258 million in funding to Lynas for the construction of the Heavy Rare Earths component of the Lynas U.S. Rare Earths Processing Facility in Texas. This is a significant increase on the US$120 million funding contribution announced in June 2022. On completion, the Facility will be the only scale producer of separated Heavy Rare Earths outside of China and so is strategically important to the US and allied nation national security needs.

The US Assistant Secretary of Defence for Industrial Base Policy, Laura Taylor-Kale said at a mining conference in Perth last week that the US has been driving the build out of a global supply chain for Rare Earths and metals used in green energy industries and defence, beyond dominant producer China since COVID upended global supply chains early this decade. She went on to say that the US is on track to meet its goal of sustainable Rare Earths supply chain management capable of supporting US defence requirements by 2027.

Rare Earths pricing imbalance

Rare Earth minerals are essential to produce military electronics such as precision-guided missiles, night-vision goggles, advanced GPS technology, and communications equipment. The US are determined to break China’s stranglehold on these critical minerals and metals. The Chinese response to US efforts to secure the domestic supply chain for these critical metals has been to significantly increase supply of Rare Earth materials to global export markets to the extent that prices have plunged. As China-based prices of Rare Earths have plummeted, so have the cashflows and profits of Rare Earths producers in the Western world. It appears that these manoeuvres by the

Chinese are aimed at de-stabilising the Western world-produced Rare Earths mineral producers to restrict their capacity expansion.

Lynas Managing Director, Amanda Lacaze has stated the strategic importance of expanding the non-Chinese Rare Earths industry and cited the Lynas partnership with the U.S. government as a means of growing critical mass outside of China to address the pricing imbalance. Ms Lacaze recently observed that “So today they (the Chinese) are still losing money…………and yet they are still producing. This is not a normal market,” she said, arguing for prices of Western-produced Rare Earths to delink from Chinese prices.

The Future

The United States needs resilient, diverse, and secure supply chains for critical metals linked to Rare Earths to ensure the country’s economic prosperity and national security. The US government is concerned that pandemics and other biological threats, cyber-attacks, terrorist attacks, and geopolitical events may reduce critical manufacturing capacity and the availability and integrity of critical goods, products, and services, including those necessary for US defence.

This means that the US will continue to work in close cooperation with its allies on resilient supply chains and this is a major positive development for Lynas and, in time, the price of Lynas Rare Earths products.