China just hiked rare earth prices… What does this mean for ASX listed rare earth stocks?

Chinese rare earth prices just went up… a lot.

We saw this in Bloomberg yesterday which said second quarter rare earth concentrate prices were up by ~45% to US$5,678) per metric ton.

(source)

That's the largest quarterly jump since all of the critical minerals back and forth started between China and the US in 2023.

The reason the news matters is because China controls somewhere between 60–85% of rare earth mining, processing, and separation globally.

And it’s because China started putting in export controls and licensing rules to tighten supply in the market over 12 months ago.

When China decides to restrict, redirect, or reprice that supply, the rest of the world has to adjust…

So the pricing move here likely carries a message beyond just simple supply and demand…

When China decides to restrict, redirect, or reprice that supply, the rest of the world has now woken up to realise that there are almost no immediate alternatives.

Rare earths generally aren’t substitutional, without reducing performance or efficiency benefits and given they are used in things like defence equipment, performance is a non negotiable.

Neodymium and praseodymium (NdPr) are required to make the permanent magnets inside EV motors, wind turbines, missile guidance systems, and the AI data centres.

So we can probably expect some more of this sort of stuff to play out between now and that Trump, Xi meeting on May 14-15…

And no surprises we are seeing more potential funding commitments like the following by Export Finance Australia and the US Export-Import Bank (EXIM) for ~A$850M a day earlier:

(source)

So, what does this mean for our ASX small cap rare earth Investments?

We think that rare earth concentrates globally being repriced higher, makes rare earth explorers and developers all that more interesting.

One of the main criticisms of the rare earth market has always been how China controls/dominates supply and therefore can control the market pricing by increasing/decreasing supply whenever they want.

Which made it impossible to invest in bringing on new supply in the west.

US Vice President JD Vance actually talked about this in a speech a few months ago at the Critical Minerals Ministerial

This event was “with partners and allies” (over 50 different countries) centered around a “whole of supply chain” fix for the critical minerals in the West

Here is a link to the full speech: Vice President JD Vance Delivers Remarks at the Critical Minerals Ministerial.

And here is a 3.5 minute clip that made the rounds on X:

(source)

Here are the two comments that really caught our attention:

5:44:

“Now, across Europe, North America, there are dozens of mining and processing initiatives that have been suspended or completely abandoned because sustained price weakness makes financing impossible”

7:30:

“We should have the kind of global markets, the kind of domestic markets that reward long term planning, that reward strategic thinking, and that's exactly what we're trying to do”

It really was a powerful speech, if you have any interest in the US critical mineral macro thematic, then it's definitely worth a listen.

Now, contrary to all of that, the Chinese are letting the price rise…

Just as western governments and especially the US have started putting in place (or at the very least) considering price floors on supply domestically.

Here is that deal the US government struck with US based rare earth producer $14BN MP Materials:

(source)

And here are the headlines from other governments (including our own here in Aus) considering price floors:

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There’s also Lynas who locked in a price floor with Japan last month:

(source)

We think that the news out of China will be another signal for the small cap end of the market to take as a green light into exploring and developing resources OUTSIDE of China.

Here are our Investments in the space - and a quick comment on what we think yesterday’s news means for them:

• St George Mining (ASX: SGQ) - capped at $480M.

SGQ owns 100% of one of the highest grade hard-rock rare earth deposits in the world. It is also the largest in South America. SGQ’s project also has a niobium resource to go with it and actually sits next to the mine that produces more than 80% of the world’s niobium supply.

Yesterday’s news makes SGQ’s project - one that could be an alternate supply option EX-CHINA, more interesting now.

See our latest SGQ note: SGQ: Rare earth and niobium in Brazil - USA deal to secure control over Brazil rare earth production.

• Locksley Resources (ASX: LKY) - capped at $66M.

LKY’s project sits right next door to $14BN MP Materials in California, USA.

LKY just started drilling its rare earth project last week - so any strong hits right now could be interesting to the market.

Yesterday’s news makes potential US sources of supply more valuable - especially if the short-term solution of buying cheap supply out of China is becoming more expensive too.

LKY also has antimony too - you can see our deep dive on that: LKY: Produces 99.5% antimony trioxide. Used in ~72% of military equipment. 100% USA sourced. First on the ASX.

• Power Minerals (ASX: PNN) - capped at $42M.

PNN is in the final stages of acquiring a high grade, mostly magnet rare earths project in Brazil. PNN also has another asset in Brazil which has rare earths and niobium that is currently working toward a maiden JORC resource.

The kicker here is similar to SGQ - it’s no secret the US is looking at Brazil for rare earths supply - it's actually funded other Brazilian rare earths projects already. We think PNN’s new asset could make things a lot more interesting for the company.

Check out our deep dive on that asset: PNN: New Brazil rare earths project. 156 drill holes. High grade hits. SGQ 2.0?

• Lodestar Minerals (ASX: LSR) - capped at $21M.

LSR’s project is a heavy rare earths project in Arizona, USA. Heavy rare earths are the more valuable, more scarce, harder to find type of rare earths. (al-beit at the very early exploration stage).

Price increases like the one seen yesterday on rare earth concentrates more broadly, just make heavy rare earths even more valuable. The kicker for this one is that MP Materials is ~225km drive away and is on record for being on the lookout for heavy rare earths to feed their 10X processing plant that’s currently getting built.

See our deep dive on LSR’s rare earths: LSR: Dysprosium, terbium and lutetium in xenotime... huh? The market liked it

• IonDrive (ASX: ION) - capped at $30M.

ION is the left of field exposure to yesterday’s news.

ION is developing Deep Eutectic Solvents (DES) recycling tech AND last year signed a deal with Colt Recycling (a leading US eWaste processor) to take eWaste feedstock and recover the rare earths.

ION is probably one of the companies that is most directly affected by increases in concentrate prices because recycled products are the most sensitive to price rises in a commodity.

So any broad based increase in prices makes ION’s tech that much more valuable for rare earths processing/recycling. Especially because the tech isn't limited by borders.

See our latest note on ION’s progress: ION: Our Critical Minerals Recycling Stock - Targeting First Revenues in the next 24 months