Lynas to stockpile inventory in response to market volatility

Lynas' Mt Weld rare earth mine. Image: Lynas Corporation.

Lynas Corp will continue to reserve production for its “strategic customers” given the volatile conditions of the neodymium and praseodymium (NdPr) market.

NdPr is a key ingredient in permanent magnet motors, which are widely used in the growing electric vehicle market.

The rare earths market, and particularly the price of NdPr, has experienced fluctuations in response to the United States-China trade war and the US’s desire to find alternative supply sources for the commodity.

Lynas has attributed heightened interest in its product and the rare earths market generally to “geopolitical and macroeconomic factors”.

“Following an extended period of softness in the published NdPr price, there was a strong price uplift later in the (June) quarter, however, the market remains volatile with the price settling back to lower levels by mid-July,” Lynas’ quarterly report stated.

As such, Lynas has “committed to (its) strategy of reserving NdPr for (its) strategic customers.”

With demand growing from the company’s customer base, Lynas said it was now focusing on reserving production to meet the “current and future needs of these strategic customers in the current quarter.”

Lynas’ intentions follow a June quarter in which the company produced 1500 tonnes of NdPr, which it said met the demand of its strategic customers while also building a small amount of inventory.

The decision to limit sales to “strategic customers” and focus on stockpiling inventory led to sales revenue for the quarter totalling $87.5 million down from $101.3 million in the previous quarter.

As of the end of June, NdPr inventory was 323 tonnes while sales receipts increased from $88 million last quarter to $106 million this quarter.

Lynas also provided an update on its Malaysian operations as it continued to work alongside the country’s government to seek agreement on conditions relating to the renewal of its operating license.

The company said it “remains confident of a resolution to the remaining issues related to the water leach purification residue” at the Malaysia site.

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