It is not immediately obvious what the main takeaway was from President Trump’s recent visit to China. The White House made great play of the establishment of a board of trade between the two countries, together with China’s first commitment to purchase Boeing (US:BA) aircraft since 2017. But beyond the usual nebulous comments on trade and shared security, there was no indication that the world’s two largest economies had made any progress on their easing respective export restrictions on advanced microchips and rare earth minerals.
Alas, in echoes of the cold war era, strategic thinking continues to outweigh commercial imperatives. Beijing did indicate that it would address US disquiet over shortages of critical minerals and rare earths such as yttrium, scandium and samarium, many of which are subject to sweeping export licensing controls. But addressing concerns over trade restrictions and doing something to alleviate them are two different matters.
It’s difficult to see either nation being willing to abandon the leverage afforded by the ongoing constraints, and there are few signs that the Trump administration has any intention of relenting on the trade tariff front.
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This impasse poses a direct threat to global trade volumes, but it also underlines why investors with a predilection for natural resources might want to consider the merits of rare earths producers outside the People’s Republic. The rationale is clear enough. Rare earths are essential in modern technological applications such as electric vehicles (EVs), wind farms and consumer electronics. But it’s their widespread use in military kit that has preoccupied policymakers in the US and elsewhere.
Their strategic necessity, heightened by China’s export controls, has impelled western governments to deploy subsidies and direct grants to fund local mining projects in these key minerals. And their very scarcity, combined with the clamour to secure transparent, embargo-proof supplies, means that producers outside China can benefit from price premiums – sometimes two to four times higher than Chinese domestic prices, according to Reuters.
There are around 30 rare earth mining and development companies operating outside China, but a much smaller subset are engaged in both extraction and processing at commercial scale. Lynas Rare Earths (AU:LYC), a vertically integrated rare earths producer from Western Australia, arguably stands as ‘best in show’. It certainly isn’t the only link in the supply chain coming out of Australia, or Malaysia for that matter, but it does have first-mover advantage and growing scale. If you are looking to gain some exposure to the 17 elements that make up the rare earths pantheon, then Lynas is probably the most viable option, not least because it’s the global leader in the separation of light and heavy rare earth materials outside China.
The miner generated around A$414mn (£220mn) in revenue in the final six months of 2025, along with pre-tax profits of A$87mn, on a gross margin of 34 per cent. It will need to significantly step up its production and sales to meet the top-line FactSet full-year consensus rate of A$2.25bn by FY2028.
The balance sheet is in decent trim. Lynas exited the year with net cash of A$818mn, albeit due to A$914mn in net proceeds generated by the issue of share capital. More pertinently, rare earth oxide production increased by a fifth on the FY2025 comparator to 6,375 tonnes, while the underlying received price rose by 53 per cent to A$68.40 per kilogramme.
Lynas is ramping up nameplate capacity through “low capital intensity” projects at its Western Australian and Malaysian sites, and is engaged in negotiations with the US defence department to settle on a mutually acceptable offtake agreement. The Pentagon has already signed a separate offtake agreement with US rival MP Materials (US:MP) for two rare earth elements at $110 (£82) per kilogramme, which Lynas believes is a “strong market signal for a higher ex-China price for rare earths products”.
As things stand, central government support, together with rising demand from the world’s militaries and the scarcity principle, underpin a favourable pricing environment. But there are gathering risks to take on board. Rare earth elements are notoriously difficult to both mine and process compared with common ores such as iron or copper, so lead times towards capacity expansion tend to be drawn out (and expensive).
Additionally, there are already signs that technological innovations will reduce our dependence on specific rare earth elements, with recycling much to the fore. Moreover, there is no doubt that we will witness increased volumes from western producers coming to market. There is always an outside chance that both Beijing and Washington will take a more conciliatory line on matters of trade, but the low probability of that outcome means the investment case for Lynas looks sound.
