Why Lynas, Iluka and rare earth stocks have more than doubled in recent months
China's grip on rare earth supply triggers explosive rally, with plenty of local names up 100% and NdPr prices forecast to double by 2027..
Source: Shutterstock
Mentioned
KEY POINTS
- Plenty of rare earth stocks have surged over 100% since July, driven by China's export controls and a US Department of Defense price floor agreement of US$110/kg for NdPr.
- Macquarie forecasts sustained supply deficits through 2027, with NdPr prices expected to peak at US$120/kg, more than double Lynas' FY25 average of US$50.6/kg.
- China controls 90% of global rare earth processing capacity, making any accelerated supply response the key downside risk to current bullish price forecasts.
Rare earths are all the rage right now, with a long list of names up more than 100% since early July. A wave of significant newsflow has triggered a supply crunch for these critical metals, with China controlling the vast majority of global production and processing capacity.
The key catalysts
The market experienced significant volatility in July following several critical events:
Chinese magnet export controls: China imposed export controls on high-performance magnets containing dysprosium and terbium in early April, triggering panic buying across the value chain. While restrictions were later relaxed, all major Chinese magnet manufacturers now require monthly export permits.
US Defence Department price floor: In July, MP Materials secured a 10-year agreement with the US Department of Defense, establishing a US$110/kg price floor for NdPr (neodymium-praseodymium). The DoD invested US$400 million in MP's equity with a commitment for up to US$350 million additional, effectively becoming a key shareholder. Stocks like Lynas and Iluka rallied 16.6% and 22.8% respectively on the day of the announcement (11 July).
China tightens production quotas: China further restricted the market through less transparent smelting and export quotas during a period of strong end-use demand, amplifying price volatility and speculation.
Foreign Direct Product Rule implementation: In October, China introduced new export controls marking its first effective use of the Foreign Direct Product Rule. Foreign companies must now secure Chinese government approval before exporting magnets containing as little as 0.1% Chinese-origin rare earth elements or manufactured using Chinese processing technologies.
Australia-US deal under negotiation: Australia is considering setting minimum prices for critical minerals and investing in new rare earth projects as part of a potential resources deal with the US, including possible price floors, government-backed loans, offtake guarantees and direct investment in Australian projects.
The US DoD investment in MP Materials was the key catalyst, though China-related headlines added further fuel to the rally.
Lynas price chart (Source: TradingView)
A parabolic move across the sector
Today marks one of the most violent moves in the sector, with several explorers rallying 20-30%. Here's how local rare earth stocks have performed:
Ticker | Company | Today | 6 Months | Price |
|---|---|---|---|---|
Australian Strategic Materials | 39.5% | 155.4% | $1.66 | |
Northern Minerals | 36.0% | 78.9% | $0.07 | |
Australian Rare Earths | 29.1% | 208.7% | $0.36 | |
Hastings Technology Metals | 21.6% | 107.4% | $0.71 | |
Meteoric Resources | 15.6% | 89.6% | $0.24 | |
Arafura Rare Earths | 15.5% | 121.6% | $0.41 | |
Iluka Resources | 12.9% | 135.0% | $8.67 | |
American Rare Earths | 11.9% | 116.4% | $0.66 | |
Brazilian Rare Earths | 8.0% | 125.0% | $5.40 | |
Victory Metals | 7.2% | 236.9% | $1.42 | |
Lindian Resources | 7.0% | 261.9% | $0.38 | |
Lynas Rare Earths | 6.9% | 152.1% | $21.66 |
Share price performance as at 11:30 am AEDT, Tuesday 14 October 2025
Where to from here?
Macquarie forecasts sustained supply deficits over the next two years as geopolitical tensions reshape the global supply chain. NdPr prices are expected to peak at US$110–120 per kilogram by early 2027, with the MP Materials-DoD price floor likely to become a benchmark for future agreements.
For context, Lynas reported average rare earth oxide selling prices of US$50.6/kg in FY25, meaning prices could more than double from current levels.
The analysts forecast a small deficit in the NdPr market for 2025, with 108,000 tonnes of supply against 110,000 tonnes of demand. The deficit is expected to persist through 2026 and 2027, with supply gaps of 6,000 tonnes and 500 tonnes respectively, before returning to tight balance between 2028 and 2030 as greenfield projects come online and recycling increases.
Source: Macquarie Research, October 2025
Demand growth remains robust, with analysts projecting 10% annual growth over the next five years.
China's 2025 rare earth output is expected to decline year-on-year due to MP Materials' concentrate suspension (MP previously sold the majority of its concentrate to China). While imports from Myanmar have partially offset the shortfall, overall supply remains tight. Recent Chinese projects have focused on pollution control upgrades rather than capacity expansion, further constraining supply growth.
Australian producers advancing expansion plans
Given the complexity of rare earth extraction and project studies (compounded by the recent downturn in prices), most companies remain relatively early stage. Macquarie highlighted the following ASX-listed names in its research report:
Lynas Rare Earths has outlined a path to 12,000 tonnes per annum NdPr separation capacity through upgrades to existing facilities. The company recently completed a $750 million placement and plans an approximately $182 million share purchase plan to fund resource expansion and extend its value chain into magnets and metals.
Iluka Resources' Eneabba Phase 3 project is more than 30% complete with most concrete work finished. However, analysts caution that the project faces execution risks during peak construction in the second half of 2026. Commissioning is scheduled for 2027 followed by a two-year ramp-up, though revenue generation could occur later than market expectations. The company has spent and committed approximately $1 billion of its $1.7–1.8 billion budget.
Meteoric Resources received consent to operate its Caldeira Project in Brazil within a previously restricted buffer zone, a significant de-risking event. The company has commenced construction of a pilot plant with capacity to produce approximately 2 kilograms of mixed rare earth carbonate daily, targeting commissioning in late November.
Australian Strategic Metals is worth noting as the only ASX-listed company with REE alloy and magnet producing capabilities.
Price outlook and risks
Analysts expect NdPr prices to peak at US$120/kg by late 2026 or early 2027, driven by strong magnet demand from electric vehicles, white goods and electronics amid limited supply response. Production expansion from Lynas, MP Materials and greenfield projects should ease tightness by late 2026, with prices expected to retreat toward US$100/kg from 2027 onwards.
Australia is in talks about a $1.2 billion strategic minerals reserve focused on rare earth elements as part of a potential partnership with the United States. The proposal includes possible price floors, government-backed loans, offtake guarantees and direct investment in Australian projects, measures that would provide additional price support and supply security.
China controls approximately 90% of global processing capacity and more than 90% of metallisation and magnet production capacity. Any trade deal or accelerated supply response could quickly undermine the current bullish sentiment and optimistic price forecasts.
That said, in the current geopolitical climate, these assets have become highly strategic. Their critical applications across defence, high-tech and medical equipment mean they're essential. As supply chains continue to fracture along geopolitical lines, control over rare earth production and processing may prove almost priceless.
