Rare Earths player Lynas charters ship to mitigate supply disruption

Australia’s rare Earth miner, Lynas Rare Earths Limited (ASX:LYC), foreseeing an upcoming boom in the rare earth industry, has taken a strategic move related to the supply of raw material. The miner has decided to charter a ship to ensure a smooth supply of raw material from Australian mines to the Malaysian processing plant.

The Company decided to make this move considering the global shipping industry facing delays and disruptions due to the COVID-19 impacts. The transit time for shipping Lynas’ ore concentrate from Western Australia’s port of Fremantle to Kuantan, Malaysia, increased from 15 days in March 2021 to 33 days in December 2021, impacting the productivity of the processing plant.

Must Read: Why are Lynas (ASX:LYC) shares in the spotlight today?

Robust demand for rare earths

In its quarterly report released on Wednesday, the rare earth miner revealed stunning sales figures, underpinned by a buoyant market and robust customer demand.

Also Read: What powered Lynas Rare Earths’ record sales revenue in Dec quarter

Lynas is the only significant rare earths player outside China, and major consumers across the globe, including Japan, Australia, the US, and the UK, are looking for options to reduce their reliance on China, which is a dominant producer of the critical mineral, required in defence and clean energy infrastructure.

Rare earths prices are expected to rise

Source: © Avigatorphotographer | Megapixl.com

Apart from supply delays, the expected rise in the prices of rare earths is the second most important factor that pushed Lynas to opt for a chartered ship for supplying raw material.

Three of China's six biggest rare earths producers, including state-owned Minmetals, will form a single entity, and history has shown that the prices of rare earths tend to rise as China consolidates its supply.

Good Read: Why share price of Lynas (ASX:LYC) is on the move

The prices of Lynas’ top product NdPr (neodymium and praseodymium) has seen a sharp rise. The prices reached above US$100 per kg in November 2021, the highest since 2011. The strong NdPr prices helped the miner clock record revenue of AU$202.7 million in the last quarter, ending December 2021.

LYC shares closed the day’s trade at AU$11.16, up 1.73% on 20 January 2022.