Rare Earths Correction: Lynas Still Up Over 112% in 2025 Despite Pullback as US-China Tensions Ease

Lynas Rare Earths (ASX: LYC) fell approximately15% this week to $13.85, but the broader trend remains intact. Despite the pullback, the stock is still up 112% in 2025, making it one of the year’s standout performers. The drop came after a major US-China trade deal eased tensions around rare earth exports, stripping away the geopolitical premium that had driven Lynas shares above $21. For investors, it’s a timely reminder: short-term headlines can distract from long-term fundamentals.

The Global Rare Earths Picture

Understanding what happened requires stepping back to see the bigger picture. Global demand for magnetic rare earth elements is projected to grow from 59 kilotons in 2022 to 176 kilotons by 2035, driven by EVs and wind energy.

Neodymium demand is expected to rise by approximately 70% by 2030, aligned with accelerating EV production. These are structural shifts in global energy and manufacturing, not short-term fluctuations.

Yet despite this demand growth, supply remains dangerously concentrated. China controls roughly 70% of rare earth mining and 90% of processing globally. That stranglehold gives Beijing enormous leverage over critical supply chains powering everything from smartphones to military hardware.

Rare earth magnets are essential components in F-35 warplanes, Tomahawk missiles, Predator drones, plus commercial applications in robotics, EVs and semiconductors. When one country controls the supply of materials this essential, it's not just an economic issue; it's a national security problem.

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Why Australia Matters

This is where Australia enters the picture as a strategic counterweight. In October 2025, the US and Australia announced a strategic critical minerals partnership, with joint commitments reportedly totalling up to $8.5 billion. The partnership includes price floor mechanisms designed to shield domestic rare earth markets from Chinese price manipulation. This responds directly to Beijing’s history of flooding global markets to undercut competitors.

Australian companies, including Lynas, are among the most active foreign investors in US critical minerals projects, playing pivotal roles in rebuilding America's domestic mineral base. For Lynas specifically, this positions the company as more than just a miner; it's strategic infrastructure.

What Changed (and What Didn't)

The recent correction stems from China's agreement to issue general licenses for rare earth exports and suspend expanded export controls that had threatened Western supply chains. That deal removed immediate supply fears, and with them, some of Lynas's geopolitical premium.

But here's the critical point: experts suggest breaking China's dominance will take at least a decade, requiring massive investment across mining, processing and manufacturing. One trade agreement doesn't eliminate structural vulnerabilities built over 30 years.

The fundamentals driving Western investment in alternative supplies haven't changed:

• Growing demand: EV and renewable energy adoption are accelerating globally
• Supply concentration: China's market dominance remains intact
• Strategic imperative: Defence and technology sectors require secure supplies
• Government backing: Billions committed to building non-Chinese supply chains

Lynas's Operational Reality

Beyond geopolitics, Lynas has genuine operational momentum. The company achieved commercial production of dysprosium and terbium oxides in 2025, making it the only commercial-scale producer of separated heavy rare earths outside China.

Lynas’s production capacity for neodymium-praseodymium (NdPr) increased to approximately 10,500 tonnes per year, based on company guidance. Rare earth prices rose significantly in 2025, with NdPr and dysprosium seeing gains of up to 40%, depending on grade and market. The company strengthened its balance sheet with a $750 million equity raising in August.

Most brokers currently rate Lynas as a ‘hold’, with recent price targets ranging between $15 and $17. This reflects cautious optimism, balancing strategic relevance against execution risks and valuation concerns.

The Investor Perspective

Lynas represents exposure to a market caught between explosive demand growth and concentrated supply. The recent pullback highlights how geopolitical headlines create volatility in strategic resource stocks, something investors need to accept or avoid entirely.

The 112% gain in 2025 looks impressive, but valuation matters. Some analysts view shares as overvalued given weaker fiscal 2025 earnings compared to the prior year, a legitimate concern when excitement about strategic importance overshadows financial reality.

For investors considering Lynas now, the question isn't whether rare earths matter strategically (they clearly do), but whether the current price adequately balances long-term opportunity against execution risks and earnings fundamentals.

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