Over the past year, a notable development in Western efforts to circumvent China’s control over rare earths has emerged: Lynas Corporation’s latest financial report indicates that it produced 62 metric tons of heavy rare earths in its fiscal year 2026.

This figure invites starkly divergent interpretations. Western media have hailed it as a milestone breaking China’s dominance, while many in China dismiss the output as negligible. Both perspectives oversimplify the reality and must be assessed within the broader context of the industry’s structure.

Lynas remains the only overseas entity to achieve commercial-scale rare earth separation. Its ore originates from Mount Weld in Australia, where mineral grades are relatively high. However, the company’s refining operations have faced prolonged challenges. Initially, it established a plant in Kuantan, Malaysia, but the production of radioactive waste triggered sustained local protests and legal disputes.

In 2023, the company relocated its most polluting and radioactively hazardous processes—specifically the cracking leaching stage—to Kalgoorlie, Australia, leaving only fine separation operations in Malaysia. Its primary product has long been light rare earths, particularly neodymium and praseodymium, with sales exceeding 7,000 metric tons last year. Heavy rare earths such as dysprosium and terbium represent a newly operational segment.

To contextualize the 62-ton figure, it reflects the cumulative output across four quarters. While the volume of dysprosium and terbium may appear modest, these elements are critical for high-temperature-resistant permanent magnets used in electric vehicle motors, direct-drive wind turbines, drones, and missile systems—applications requiring performance under extreme thermal stress.

Global annual demand for dysprosium and terbium combined is under 2,000 metric tons. Lynas’s 62-ton output accounts for roughly 3% of global supply—about 5 metric tons per month. This falls far short of meeting even the commercial market's needs, let alone fulfilling U.S. defense requirements.

Yet the significance lies not in current market share. Prior to May 2025, there was virtually no stable, large-scale production of heavy rare earths outside China—meaning this industry began essentially from zero. Achieving 62 tons in one year represents a rapid ramp-up, which is the key takeaway. Even a limited supply provides strategic buffer time; should disruptions occur, the United States and Japan could maintain operations for several months—a window that translates into leverage during negotiations.

However, the supply chain’s vulnerabilities remain evident. In the most recent quarter, fluctuating ore grades and ongoing upgrades to crushing equipment disrupted the entire cross-border production line, directly impacting output. This exposes a common misconception: rare earths are not scarce in terms of raw material availability. The real challenge lies in consistent ore processing and the complex, multi-stage solvent extraction technology required. While the principles are documented in textbooks, mature and reliable process expertise resides in the hands of seasoned engineers—not something that can be rapidly replicated through capital investment alone.

A further constraint is pricing. Current spot prices for heavy rare earths abroad can reach four to five times the Chinese ex-factory cost. Lynas’s production costs significantly exceed those of domestic Chinese firms. Its survival hinges on government-backed support and long-term off-take agreements. Japan’s JARE has secured a floor price guarantee, while the U.S. Department of Defense provides guaranteed orders to related companies. Without this layer of subsidy-driven protection, Lynas would not withstand competition from China’s low-cost producers.

Lynas is currently in pilot production of samarium, though output remains too small to disclose publicly. Samarium-cobalt magnets are primarily used in military applications, and customer certification typically takes years. Full-scale commercialization is unlikely before 2027 or 2028, with gadolinium production expected even later.

In sum, 62 tons of heavy rare earths does not undermine China’s dominant position in the rare earth value chain. The full suite of controls—from mining quotas and separation capacity to magnet manufacturing and export regulation—remains intact. Yet this development should not be underestimated. With government procurement and guaranteed purchase agreements sustaining it, the dormant midstream rare earth industry overseas has effectively reactivated. The upward trajectory is already underway. That is the most consequential signal.

Original source: toutiao.com/article/1881358207053888/

Disclaimer: The views expressed in this article are solely those of the author.