I am curious to know how much Motley Fool know Chinese economy and RE industry. IMO, the RE price will be strong since now even if China increases production.
The deja vu RE price crashed before is highly unlikely to happen since one main reason for it was that the Chinese rare earth black market used to be 40% of total production (
如果稀土成为中国反制美国的武器 | 经济纵横 | DW | 07.06.2019) But now it almost fades out. Not only Lynas suffered from it, but Chinese RE miners as well.
Secondly, China is not able to launch a price war anymore due to China has printed too much money- M2/GDP is twice more than that of USA, thus huge corporate debts and increasing corporate debts defaults, referencing
Post #:52562446. With limited finance resource, Chinese style burning money focuses on semiconductor industry. However, even for such priority industry, ironically, last December, "Tsinghua Unigroup Co., a top chipmaker, said it wouldn’t be able to repay the principal on a $450 million dollar bond, after it defaulted on a 1.3 billion yuan local bond in November." , referencing same post above. Check Northern Rare Earth financial situation, margin profit has been declining to about 11% .
Last not the least, I can't figure out the motive of such price war. To get rid of Lynas? It's absolutely impossible since Lynas is backed by the West. To dominate NdFeB supply chain by lower price? It's also impossible as the West has miners like Lynas, magnet makers like Hitachi Metal. To dominate EV production? It's also impossible as the leader is Tesla, especially for automation, and VW, GM also are very strong. One possibility is likely, that is to scare Lynas retail share holders in order to corporate with shorts.
The low inventory level and strong demand push China has to produce more RE and has to import ore from Myanmar and US. Interestingly, the ore from US has been charged 25% custom duty as China fought back against Trump's tariffs. China knows Biden's determination and will use all tools to level playing field if any dumping occurs.
The increasing strong demand look like an elephant in house when shorts manipulate narrative of RE price story. Don't forget Biden's executive order to check the RE supply chain as well as the Quad's concern of it. Don't forget Biden's way to ban China export to US by buying products "made in America". Don't forget Biden's ambition to surpass China's EV production. How demand is different from that period of time! Now e-mobility revolution is coming as well as green economy. The game has changed.
(20min delay)