The two major rare earths producers outside of China are clamping down on costs to weather a sharp drop in prices and weak Chinese demand, executives said during recent earnings calls.

Rare earth minerals play a key role in the energy transition as they are important ingredients in the magnets used in both wind turbines and electric vehicles. Metals production is heavily concentrated in China, and the market tends to follow the economic conditions in that country, executives said.

Australia-based Lynas Rare Earths Ltd.'s average selling price for neodymium-praseodymium, a combined material used in magnets, fell 32% year over year to A$35.50 per kilogram for the July–December 2023 period. US-based MP Materials Corp., another rare earths producer, saw its realized price drop 34% year over year to US$5,622 per metric ton of rare earth oxides in concentrate for the December 2023 quarter.

"As we're looking to a market with softer pricing, it is essential that we keep a laser-like focus on our cost performance," Amanda Lacaze, CEO and managing director of Lynas Rare Earths, said during a Feb. 26 analyst call.

MP Materials is looking for new operational efficiencies to reduce production costs.

"Where yields have room for improvement, we are focusing on optimization before pushing volume for volume's sake," Michael Rosenthal, the company's COO, told analysts Feb. 22.

The two miners account for roughly 20% of the global market to China's 80%, according to James Litinsky, chairman, president and CEO of MP Materials.

China's economic recovery is seen as the main factor that could turn prices around, Lynas Rare Earths said in its presentation. A downturn in China's construction sector has affected demand from air conditioning equipment and other appliances that use rare earths magnets in compressors and other motors.

Peak Rare Earths Ltd. sees a number of factors supporting a price recovery in the coming months, including potential supply disruptions in Myanmar, further consolidation in the Chinese rare earths sector, and growing demand from the offshore wind sector, the company said in a Jan. 31 quarterly report. The Australian miner owns the preproduction-stage Ngualla rare earths project in Tanzania.

"At these prices here, we are being extra thoughtful because we just want to maximize our cash flow," Litinsky said during MP Materials' Feb. 22 call. "But we are still working very maniacally to get our cost structure down because we know that the pendulum will ultimately swing. And typically, the cycle seems to be moving faster these days."

Despite the market's current weakness, Lynas Rare Earths still sees strong demand further out. The company projects supply will need to grow by 81% by 2035 to meet forecast demand.

Rare earth elements are used in electric vehicle batteries, smart phones, defense technology and other applications that require a very high strength-to-weight ratio and performance at high temperatures.

Lynas Rare Earths' net profit plunged 74% year over year to A$39.5 million for the six-month period ended Dec. 31, 2023. MP Materials reported a net loss of US$16.3 million for the fourth quarter of 2023, swinging year over year from a profit of US$67 million.