Lynas Rare Earths inks a revamped supply deal to Japanese customer with ‘magic’ China-busting floor price

Shares in Lynas Rare Earths have surged after the company revamped a Japanese offtake deal with a ‘magic’ floor price baked in that counters China’s market dominance. Lynas’ updated supply deal with its large long-term customer Japan Australia Rare Earths has set a minimum price of $US110 per kilogram for the key neodymium and praseodymium (NdPr) product. The new deal, which runs until 2038, includes an “upside price sharing arrangement”. “Where Lynas’ achieved price is above $US150/kg NdPr, an amount equal to 30 per cent of the upside above $US150/kg NdPr, capped at a maximum of $US10 million each calendar year, will be paid to JARE,” Lynas stated. JARE — which is the world’s biggest customer for rare earths materials outside of China — will also buy 5000 tonnes of Lynas’ NdPr a year and 50 per cent of the company’s heavy rare earth oxide output until 2038. China has sought to maintain a stranglehold on the rare earths market and last month imposed export bans on Japanese companies that use rare earth materials. Lynas’ stock jumped 16.2 per cent on news of the deal to $20.59, equating to about $2.9 billion worth of value gained for its shareholders, making it the second-biggest gainer of the day. Average prices of NdPr were languishing below $US60/kg at the end of 2024 but have been on the rise since the US government and the Las Vegas-based MP Materials inked an offtake deal last year with a $US110/kg floor. That pioneering agreement was established to curb China’s manipulation of the rare earths market. Beijing’s ability to control the prices of rare earths, which are a bundle of elements used to make magnets that power high-tech weaponry, medical equipment and smartphones, appears to now be over. Federal Resources Minister Madeleine King is also said to be mulling a similar NdPr price floor in setting up Australia’s strategic reserve of critical minerals. Lynas’ outgoing chief executive Amanda Lacaze has previously said that NdPr prices passed the “magic” $US110/kg threshold on the open market late last month. Ms Lacaze on Wednesday said the company’s relationship with JARE for the past 15 years had given it a strong foundation. “We are delighted that the revised 12-year availability and supply agreement with JARE will support both Japanese industry and the continued growth and development of Lynas,” she said. “This new agreement will ensure continued reliable supply of rare earth products that are strategically important to Japanese industry and its global market, and at the same time, the implementation of fair market pricing will reduce price volatility for Lynas and enable continued growth and investment in our operations.” Lynas counts Australia’s richest person — Gina Rinehart — is the company’s second largest shareholder. AustralianSuper is number one.