Lynas Rare Earths Ltd (ASX: LYC) shares are pushing higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) rare earths miner closed yesterday trading for $14.70. During the Tuesday lunch hour, shares are swapping hands for $15.07 apiece, up 2.5%.
For some context, the ASX 200 is up 0.2% at this same time.
With today's intraday gains factored in, Lynas Rare Earths shares are now up a whopping 130.6% year to date.
Lynas has been a direct beneficiary as demand for the critical rare earth elements – Neodymium (Nd) and praseodymium (Pr) – it produces soars as Western nations seek to end China's stranglehold on rare earths supplies.
Both elements are crucial in the production of everything from smartphones to wind turbines to electric vehicles, alongside numerous military applications.
Image source: Getty Images
Lynas Rare Earths shares well-placed for more outsized gains
Looking to the year ahead, the team at Macquarie Group Ltd (ASX: MQG) expect more outperformance from the ASX 200 stock.
That's despite the significant power disruptions Lynas reported on 25 November, which negatively impacted production at its Kalgoorlie Rare Earths Processing Facility in Western Australia.
Management advised on the day that the power disruptions will also affect the production of finished goods at Lynas' Malaysian facility.
Following the 25 November power issues, Macquarie noted:
While the exact impact has not been disclosed, we note that the operation was running in batch production mode prior to these power issues. LYC is working with the WA government to improve grid stability and is also evaluating off-grid solutions.
And the broker doesn't expect investors will see a materially negative impact on Lynas Rare Earths shares.
Macquarie said:
The Kalgoorlie disruption coincides with a planned major shutdown at the cracking and leaching facility in Malaysia, leading to production losses in 2QFY26. The company expects to lose approximately one month of output but plans to maintain sales through inventory drawdown.
We estimate NdPr production of 1.7kt in the December quarter, followed by output recovery in 2HFY26.
Noting that it expects the NdPr market to remain tight, the broker said, "We forecast LYC to sell 9kt of NdPr in FY26, supported by its ~7ktpa Malaysian facility and additional volumes from Kalgoorlie."
Connecting the dots, Macquarie maintained its outperformance rating on Lynas Rare Earths shares with a $17.00 12-month price target. That's almost 13% above current levels.
"We expect the NdPr market to remain tight fundamentally, driven by solid demand and supply disruptions. LYC remains the largest ex-China REE producer," Macquarie concluded.
