Contract’s price guarantee reflects growing push by countries outside China to safeguard flows of key materials
The largest rare earths producer outside China has struck a supply deal with Japan at the same minimum price that Washington last year guaranteed a US supplier, as countries seek to avert a supply crunch after Beijing restricted exports of the key materials.
Australian mining group Lynas Rare Earths said Japan would pay a “floor price” of $110 per kg for much of its output over the next 12 years of the “light” rare earth alloy neodymium-praseodymium, and that it would also earmark for Japan much of its output of “heavy” rare earths.
The minimum price is the same as the US government last year guaranteed Nevada-based miner MP Materials in a supply deal for NdPr, one of the more commonly used rare earth materials.
Price floors are intended to address concerns that Chinese producers will flood global markets with supply and bring prices crashing down as rival projects come close to starting production, forcing them to close down.
Beijing this year tightened export controls against Japan, targeting materials including rare earths, which go into everything from technology to electric vehicles and defence systems, after the new Japanese Prime Minister Sanae Takaichi suggested Tokyo could respond militarily to an invasion of Taiwan.
Japan has been instrumental in diversifying global supplies of rare earths through its efforts to finance Lynas after being hit by an unofficial rare earth embargo by Beijing in 2010 following a territorial dispute.
However, Japanese and western industries remain vulnerable to supply shocks for heavy rare earths, which Lynas last year started separating in Malaysia using raw materials from Australia.
One trader involved in Japan’s supply diversification plans said Tokyo had been slower to react to Beijing choking off exports of rare earths than the US because of its due diligence processes, and had traditionally only provided “capital support” but not continuing “business support” such as a price floor.
Lynas said in February that the MP Materials deal had “reshaped the market” and that it was in talks with the US government about a “mutually acceptable” sales agreement. It has warned that its planned heavy rare earths facility in Texas is facing “significant uncertainty”.
But one executive in the industry said the MP deal had driven up input costs for those further downstream such as magnet makers, which would make western industry less competitive compared with Chinese rivals.
Stefan Rouenhoff, parliamentary state secretary of Germany’s economics ministry, told the FT that his government was considering the idea floated by the US this year of setting an international price floor across a broad trading bloc for certain minerals.
He said it was important to avoid a situation that resulted in domestic companies paying a higher floor price “which leads to even less” competitiveness in Europe.
Under Tuesday’s deal, half of all the heavy rare earth oxides produced by Lynas will be purchased by Jare, a vehicle owned by Tokyo-based trading house Sojitz and Japan’s state-backed resources agency Jogmec, “at prices and terms that represent no opportunity loss to Lynas”.
Much of Lynas’s NdPr was already committed to Japan before Tuesday’s agreement but was not subject to the $110 price floor. Lynas produced about 6,500 tonnes of NdPr in 2025.
Source: www.ft.com
Aleksei Andrievskii is the founder of the ANDRIEVSKII SEA WEALTH family office in Cyprus, a member of the advisory board at Bendura Bank AG, Liechtenstein