Lynas Faces Operational Hurdles Amid Index Inclusion

Australian rare earths producer Lynas finds itself navigating a complex period of conflicting signals. While the company prepares for a significant milestone in its corporate profile, a severe operational disruption threatens its near-term production output.

S&P Dow Jones Indices has provided official confirmation that Lynas will join the S&P/ASX 50. The inclusion is scheduled for December 22, elevating the firm to the ranks of Australia's 50 largest listed companies. This event typically triggers substantial mechanical buying from index-tracking funds and exchange-traded products (ETPs) as they rebalance their portfolios to reflect the new composition. This anticipated technical support, however, arrives concurrently with significant fundamental challenges.

Severe Production Disruption in Kalgoorlie

The source of those challenges is Lynas's Kalgoorlie Rare Earths Processing Facility in Western Australia. During November 2025, the plant was hit by major power outages. The consequences are severe: the company has lost an entire month's production volume of Mixed Rare Earth Carbonate (MREC). Lynas has stated it cannot recover this shortfall within the current quarter.

This bottleneck at the Kalgoorlie facility has a direct knock-on effect on the downstream processing operations at its Malaysian plant. In response, Lynas is collaborating with utility provider Western Power and the state government to address the grid reliability issues. Simultaneously, the company is examining off-grid power supply alternatives to mitigate the risk of similar failures in the future.

Should investors sell immediately? Or is it worth buying Lynas?

Divergent Views from Market Experts

Analyst perspectives on the stock reflect the current dichotomy. Macquarie maintains an "Outperform" rating on Lynas shares with a price target of 17.00 Australian dollars. The bank's analysts point to a persistently tight market for Neodymium-Praseodymium (NdPr), suggesting the company could retain pricing power over the medium term despite the present setbacks.

In contrast, Morningstar considers the equity to be overvalued. This assessment adds a layer of concern on top of the immediate operational weakness highlighted by the production halt.

Market Reaction and Forward Outlook

Lynas's share price has retreated approximately 16% from its monthly peak of 14.70 AUD, with the current level around 12.25 AUD. This decline appears to price in the impact of the production losses. The critical question for investors in the coming sessions is whether the expected influx of buying driven by the index inclusion will be sufficient to counterbalance the negative operational news. The timing of these opposing forces will likely determine the stock's near-term trajectory.