UBS has named Lynas Rare Earths as its top pick in the rare earths mining sector, citing an increasingly clear split between China and Western markets as governments expand policy support and the industry adapts its structure.
In its assessment, the investment bank retained its prior rankings after adjusting price forecasts in the wake of the Lynas-JARE transaction. UBS reiterated a positive long-term outlook for rare earths and underscored the sizable opportunities emerging outside China as Western policymakers work to secure supplies of strategic minerals.
Supply concentration and technology gaps
UBS highlighted that China still dominates the sector, accounting for 60-70% of global mine output and roughly 90% of refining capacity. The bank also noted that China retains a 20-year technological lead in refining and separation processes, and that export controls are tightening - a factor that reinforces the urgency among Western nations to develop alternative supply chains.
Western cooperation and capacity building
Increasing collaboration between countries - notably Japan and the United States - could speed the expansion of brownfield refining and separation capacity as policymakers respond to the concentration risk posed by China. UBS cautioned, however, that continued government support will be necessary because firms operating outside China, such as Lynas in Australia and MP Materials in the United States, remain strategically important but face commercial headwinds.
Those headwinds include materially higher operating costs: UBS estimates refining and separation costs outside China run about 40% above Chinese levels. The bank framed this cost differential as a key constraint on near-term commercial competitiveness for Western-aligned producers.
Market signals and pricing
UBS pointed to several market signals consistent with a bifurcating market. NdPr prices have moved from $50 to $95 per kilogram on a year-over-year basis, illustrating tighter domestic supply-demand balances within China alongside a growing split in pricing between markets. The bank also referenced the Department of Defense-MP Materials arrangement that established a $110 per kilogram NdPr benchmark, suggesting that such a price reference could eventually extend into the broader Western market over time, although UBS said that would not be immediate.
Within this pricing backdrop, Lynas reported a record average selling price of AUD 98 per kilogram for its June quarter, which the company attributed to robust demand. Lynas also disclosed an improved cash position, even as NdPr production was affected by variations in ore quality at its Mount Weld mine.
Outlook and policy expectations
UBS expects additional policy measures from other governments, with Australia and the European Union among the jurisdictions likely to roll out initiatives supporting rare earth supply chains. At the same time, UBS emphasized that building integrated, non-Chinese value chains will take time and sustained support given existing cost and technology gaps.
Summary
UBS names Lynas its top rare earths pick as Western nations increase efforts to develop mining, refining and separation capacity outside China. The bank retained its rankings after price-forecast updates related to the Lynas-JARE deal, highlighted persistent cost and technological disadvantages for non-Chinese producers, and noted recent NdPr price moves and Lynas's record selling price for the June quarter.