baotou's concentrate plant shut down 6 months, page-11

Ganderson

I'm struggling to see how a voluntary shutdown (if this indeed one) is bad news for Lynas. By restricting supply, both through this shutdown and the June/July crackdown on illegals, this demonstrates a pretty strong signal on how low China will allow REO prices to go. One of the key reasons why Lynas is currently valued on a bankruptcy basis is because of a lack of investor confidence around how low prices can go before demand recovers. Having the largest supplier in the global market potentially put a floor under the prices is - IMHO - good for investor sentiment as it helps derisk downward price volatility, at least over the 6-month term. It also demonstrates how the Chinese govt / producers are prepared to be activists to keep the REO prices above a certain level.

Obviously we the demand side of the equation to recover as as well, but for me 1 out of 2 ain't bad, especially compared to how the price / supply situation was 2 weeks ago. But i think this medium-term low-demand environment is now built into everyone's base case, unless they've been under a rock for the last year.

I appreciate your comment though and welcome debate on this. How would a Baotou shutdown be a bad thing for Lynas?

Regards
Jaydog