Lynas Breaks China's Three-Decade Grip on Heavy Rare Earths Processing

Lynas Rare Earths begins producing terbium and dysprosium in Malaysia, breaking China's monopoly as the West races for supply chain independence by 2027.

The world's first commercial heavy rare earths separation facility outside China in thirty years is now operational in Malaysia, marking a pivotal moment in the West's struggle to untangle itself from Beijing's dominance over critical minerals. Lynas Rare Earths has begun producing terbium and dysprosium at its Kuantan plant — elements essential for the high-performance magnets that power everything from F-35 fighter jets to electric vehicle motors.

The breakthrough comes as no coincidence. China's 2025 export curbs on critical minerals jolted Washington into action, forcing the Pentagon to fast-track supply chain independence. The US Department of Defense has designated Lynas as a strategic partner, with a target to eliminate reliance on Chinese-sourced materials by 2027.

CEO Amanda Lacaze describes the emerging supply chain as a relay: Lynas feeds Japanese magnet manufacturers with non-Chinese rare earths, who in turn supply US defence contractors. On paper, it looks robust. Industry experts caution, however, that scaling up to full production capacity will take years.

The technical challenge is formidable. Separating heavy rare earths requires hundreds of chemical processing steps using industrial acids — a costly, complex operation that explains why China has dominated this segment of the supply chain for so long.

Malaysia Emerges as the Strategic Hub

While Kuantan ramps up production, Lynas's planned US facility in Seadrift, Texas is hitting turbulence. The project, backed by $258 million in Pentagon funding, faces sharply higher wastewater treatment costs. Lynas itself has flagged "material uncertainty" over the Texas site's future.

Capital is instead flowing to Malaysia. A second heavy rare earths processing plant is slated for completion there by 2028, shifting the company's strategic centre of gravity further into Asia — at least for now. The Malaysian facility is already processing samarium, terbium and dysprosium, elements previously refined almost exclusively in China.

Record Numbers, Cautious Analysts

The operational results speak for themselves. Lynas more than doubled quarterly revenue to A$265 million, while production of rare earth oxides jumped 69 percent to roughly 3,230 tonnes. The average price for neodymium-praseodymium climbed 25 percent quarter-on-quarter, driven by shifting market price indices and a growing share of index-independent sales.

Cash reserves held steady above A$1 billion despite ongoing capital expenditure. The stock has nearly tripled since its 52-week low in May 2025, and has gained around 69 percent since the start of the year.

Morgan Stanley, however, has turned more cautious. The bank downgraded Lynas from "Overweight" to "Equalweight" in April, setting a price target of A$20.45. The rationale: government-subsidised supply growth could pressure prices over the long term, and much of the positive outlook is already priced in. The analyst consensus target sits below the current share price, suggesting the market is more optimistic than published valuation models.

At €12.10, the stock trades roughly 150 percent higher than a year ago but remains nearly nine percent below its 52-week high.

Leadership Change at a Critical Juncture

Amid this strategic realignment, a change at the top is approaching. Lacaze, the longest-serving female CEO in the ASX index, is stepping down after twelve years. During her tenure, market capitalisation swelled from around A$400 million to nearly A$15 billion. She will remain until the end of the current financial year while the board conducts a global search for a successor.

The company is simultaneously locking in demand. A supply agreement with Japanese joint venture JARE has been extended through 2038, with annual deliveries of 7,200 tonnes of neodymium and praseodymium. That diversification matters because military demand alone is relatively small.

The long-term viability of a standalone Western rare earths supply chain ultimately hinges on whether automakers and electronics manufacturers shift to non-Chinese sources at scale. Until that happens, Lynas faces the challenge of turning operational success into a sustainable business model — a task that will fall squarely on the next CEO's shoulders.