My take on this week's commodity correction and future predictions.

I haven't been active much in HC, but just wanted to say to everyone to be positive and not worry too much about this week's correction.
Never be depressed, angry, since the whole point of investing is to make more money so to make one's life happier!

FMG, RIO, BHP's share prices have been decreasing since late July until now. China's lockdowns have caused a dent in construction, with iron ore prices dropping dramatically https://tradingeconomics.com/commodity/iron-ore from $220 pt to $140 pt.

This hasn't affected LYC, ORE, GXY (non iron ore) during July - pre correction since iron ore mainly is for construction purposes. Lithium prices https://tradingeconomics.com/commodity/lithium have recently actually started to go up. REE prices have continued it's upwards trend, with a very small recent drop, so LYC and cousins did well.

However, China a few days ago released data about slowing retail sales. Likewise, the US's FOMC minutes showcased a possible tapering later this year. People were again scared about US's Delta outbreaks. UK's inflation data showed an unexpected drop in inflation. These all caused markets to feel angsty with the premarket a few days ago dropping. Exacerbating this with Afghanistan's turmoil and speculation of China's iron ore, lithium, cobalt and REE interest in Afghanisation, and coupled with Malaysia's political instability, a perfect storm was created for Lynas.

However, let's take a step back and think logically:

1. Iron Ore prices have plummeted. Have REE prices plummeted? NO.
2. Iron Ore prices have plummeted. Have Lithium prices plummeted? NO again.
3. Will the US be impacted by Delta? YES. Look at China's slowing retail sales.
4. Will the US be greatly impacted by Delta? NO. CDC have approved a 3rd booster shot for use in September.
5. Will the Fed increase interest rates? 90% NO. If the US is impacted by Delta, the Fed has 2 goals - price stability and maximum employment. If covid causes more unemployment, or UK's inflation data filters to the world (ie covid just caused temporary demand), then the Fed will unlikely jolt IR up.
6. Will China partner with Afghanistan to mine REEs, iron ore, lithium etc? 65% YES. China recently has had a clampdown on education, tech, property to focus on environmental sustainability, equality and the wellbeing of their citizens. They mentioned a curb on environmentally damaging mining. So it's entirely possibly China's domestic demand will be replaced with Afghanisatan's.
7. NOTICE the keyword - REPLACED. This means Supply(REE) will NOT increase, but generally stabilise. China will decrease their production domestically, whilst increasing production in Afghanisation to curb pollution.
8. Will Malaysia's political issues impact Lynas? 80% NO. UMNO was recently sworn back in! From multiple reports, they are generally Lynas friendly, and Ismail is known for being anti-China...
9. Will a drop in inflation which causes a reduction in commodity prices be seen globally? 70% NO. It's clear the whole world is in the 3rd wave / 4th wave of COVID. For now, lockdowns will cause a slowdown in demand. However, late 2021 will see another crazy demand increase.

In conclusion, commodities like Iron Ore might continue being in trouble, however, REE stocks are clearly going to recover next week as people over the weekend reanalyse and rethink the world's status. According to Wikipedia https://en.wikipedia.org/wiki/Mining_in_Afghanistan#Rare-earth_elements, Afghanistan has a measly 1M tonnes of REOs with unknown value and unknown grade. https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-rare-earths.pdf shows Australia having 4M tonnes, and China 44M tonnes. I don't see how Afghanistan's even remote chance of extra supply can do anything.

It's clear the next few weeks Lynas will be favoured amongst commodities stocks, since:

1. US's DOD will provide a good update (not sure when, but 99.99% sure this will happen)
2. Lynas's Annual Report will be fantastic. (100% sure, though 75% sure on whether this will beat analyst expectations).
3. House Dems will annouce their $3.5T package.
4. US will announce a tariff on NdPr. (99.9% sure they will, but % unknown).
5. With the new change in Malaysia's leadership, the PDF on Sept 2 is more likely to be fine than when the old gov was in place (85% sure).
6. 
   

To ease people's minds, FMG and RIO seemed to have closed a bit higher at the end of Friday.