Companies respond to sharp downturn in critical mineral prices

January 22, 2024

Australia’s Lynas Rare Earths said its second-quarter revenue fell sharply, missing analysts’ estimates, as prices plunged during a slowdown in construction activity in China, sending its shares to 30-month lows.

Rare earth prices during the quarter extended declines as demand in China, especially in the country’s appliance sector, fell with the construction downturn, said Lynas, the world’s largest producer of rare-earths outside China.

The miner said its sales fell 51.7 percent to A$112.5 million ($74.06 million) in the three months to Dec. 31, from A$232.7 million in the year-ago period. It missed Macquarie's estimate of A$117.8 million.

“(The) major issue for the company at present is the commodity price trajectory and demand in China,” said analyst Dan Morgan of Barrenjoey.
“There wasn’t anything positive the company said on demand to change the prevailing market mood.”

A number of critical mineral commodities have experienced a sharp downturn in prices. On Jan. 18. Reuters reported a sharp decline in nickel prices driven by a jump in Indonesian supply, has hit Australian nickel producers, leading to mine closures, production cuts and writedowns in recent months.

BHP said it was reevaluating its nickel business. Analysts said it may need to write down its $1.2 billion West Musgrave project. Canada’s First Quantum Minerals on Monday said it will cut jobs and production at its Ravensthorpe mine in Australia due to a “significant” downturn in prices that it expects to last three years.

A downturn in lithium prices led Albemarle, the world’s largest lithium producer, to cut jobs and defer spending on a U.S. refinery project as part of a wide-ranging plan to slash costs amid falling prices of the metal used to make electric vehicle batteries.

Global supply of lithium over the past year has outpaced demand from the battery market, fueling a glut that has dragged on pricing. While lithium prices can vary by region and type, an index of prices tracked by Benchmark Mineral Intelligence, for instance, has dropped by 81 percent in the past year and nearly 11 percent in the past month alone.

Albemarle, which supplies Tesla and other automakers, sells most of its lithium on long-term contracts linked to market pricing. The company had flagged last November that a softening in lithium prices would dent 2023 sales, although executives described the market volatility as “road bumps” and not any erosion of long-term expectations for strong demand.

Albemarle said it now plans 2024 capital spending in the range of $1.6 billion to $1.8 billion, down from about $2.1 billion in 2023. The company also plans to defer spending on a massive U.S. lithium refining project in South Carolina that was designed to be one of the world's largest processors of the battery metal.

Lynas said it has largely completed construction at its Kalgoorlie rare earths processing plant, which will also feed mixed rare earth carbonate to the new Lynas Seadrift facility in Texas serving the U.S. Department of Defense.

Lynas has been upgrading its Malaysian processing facilities to increase separation capacity to 10,500 tons per year for neodymium and praseodymium, used in magnets in sectors from electrified transport to defence.

The firm halted all Malaysian operations, barring one, in mid-November.

Lynas’ expansion project at the Mt. Weld mine in Western Australia remains on track, Lynas said, after a completed drilling program showed extensive rare-earth mineralization around the mine.

Lynas estimated March quarter production at around 1,360 t (1,500 st), above its previous estimate of around 816 t (900 st).



Related article search: