Australia will mine the material. Malaysia will separate it. Vietnam will turn it into metal. Magnet manufacturers in Asia and the United States could take it from there.
That is the supply chain taking shape around a March 2026 framework agreement between Australia's Lynas Rare Earths (ASX: LYC) and South Korea's LS Eco Energy. Lynas would supply separated rare earth oxides to a new metal-making facility in Vietnam, starting with samarium and potentially expanding into neodymium-praseodymium, dysprosium and terbium. The two companies also intend to invest about A$30 million in each other through convertible instruments (Lynas ASX announcement, 26 March 2026).
The investment is modest. The industrial position it creates is not. China controls about 91 percent of global rare earth separation and metal production and 94 percent of sintered neodymium-iron-boron magnet manufacturing (International Energy Agency estimates, cited in RUSI, June 2026). The proposed plant would place Vietnam inside one of the stages that manufacturers outside China have struggled to reproduce.
The facility alone will not create a Vietnamese rare earth industry, but it could become the first major asset in one.
Executive summary
China's strongest rare earth advantage lies in processing and magnet manufacturing, not mining. It mined about 69 percent of global output in 2025 but controls 91 percent of separation and metal production and 94 percent of sintered magnet capacity (US Geological Survey and International Energy Agency estimates, cited in RUSI, June 2026).
The Lynas and LS Eco Energy agreement gives Vietnam a potential role in rare earth metal production, the stage between separated oxides and magnets, beginning with samarium.
Vietnam's existing Korean and Japanese manufacturing base reduces execution risk, from LS Cable & System's Hai Phong operations, running since 1996, to Shin-Etsu Chemical's magnet plant in the same city.
Commercial metal production would validate the plant. Downstream magnet investment is required to validate the broader industry thesis, and that is the outcome VNANZ will watch for.
1. The bottleneck lies beyond the mine
Rare earths are 17 elements, and most are not scarce in the ground. The difficulty is separating chemically similar elements and converting them into metals of sufficient purity. Separation can require hundreds of chemical stages, and heavy rare earths such as dysprosium and terbium occur in low concentrations (RUSI, June 2026).
The most valuable application is the permanent magnet: strong, light and stable under heat, in motors, robots, wind turbines, aircraft and defence systems. Magnet-related applications account for more than 90 percent of the economic value attributed to rare earth compounds (BCG analysis, cited in RUSI, June 2026).
Mining supplies the resource, but three more manufacturing stages stand between the ore and an industrial customer. The proposed LS Eco Energy facility would put Vietnam at the metal stage.
Mining produces a concentrate. Separation isolates individual rare earth oxides. Metal production then converts those oxides into material suitable for magnet manufacturing, and the magnets must be qualified for specific motors, aircraft or industrial systems. Value and difficulty rise along this chain, and China's control rises with them.
China produced about 270,000 tonnes of rare earths from global mine output of about 390,000 tonnes in 2025, a mining share of roughly 69 percent (US Geological Survey 2025 estimates, cited in RUSI). Beyond the mine, it controls the processing capacity the rest of the world has struggled to replicate: 91 percent of separation and metal production and 94 percent of sintered NdFeB magnets.
Policy reinforces the position. Production quotas set supply, export licences control selected materials, and a 13 percent VAT rebate on exported magnets favours finished magnets over the raw materials foreign competitors need (Lynas submission to the US Department of Energy, 2022, cited in RUSI). The April 2025 export controls showed how the advantage is used. China restricted seven medium and heavy rare earths, including samarium, dysprosium and terbium. Dysprosium oxide exports fell to zero in May, while permanent magnet exports recovered by July and total rare earth exports ended 2025 at a record 62,585 tonnes (Chinese customs data, cited in RUSI).
China did not retreat from global markets. It kept exporting the higher-value product while restricting the inputs competitors need to make it independently. Metal-making capacity outside China remains thin. RUSI's June 2026 survey of producers runs to four names, Less Common Metals in the UK, MP Materials in the United States, Lynas in Malaysia and Iluka at pilot scale (RUSI, Table 6). None is in Southeast Asia.
2. What the Lynas and LS Eco Energy agreement creates
On 26 March 2026, Lynas and LS Eco Energy entered a framework agreement to develop rare earth metal production at a new facility in Vietnam (Lynas ASX announcement). Lynas mines at Mount Weld in Western Australia and separates the material into individual oxides at Kuantan in Malaysia. LS Eco Energy would convert those oxides into metal in Vietnam for permanent magnet manufacturers in Asia and the United States.
Australian material, Malaysian separation and South Korean industrial expertise would converge in Vietnam. The output could support permanent magnet manufacturing in Asia and the United States.
LS Eco Energy plans to begin samarium production at a new Ho Chi Minh City facility. Its board approved the project in December 2025 at about A$30 million, with production targeted for the fourth quarter of 2026 (The Metalnomist, 22 May 2026, and Engineering News, 26 March 2026). Metallised NdPr, dysprosium and terbium could follow.
The levels of certainty differ, and they matter. The framework agreement is non-binding, with definitive agreements still to be signed. The Ho Chi Minh City facility is board-approved. The fourth-quarter 2026 start is a company target. Commercially qualified output does not yet exist anywhere in this chain.
Samarium gives the plant immediate relevance. Samarium-cobalt magnets keep their strength at high temperatures, for aerospace, defence and demanding industrial systems, and all three of the plant's planned products were included in China's April 2025 controls (RUSI, Table 3). Customers sourcing them outside China escape the licensing delays RUSI found were the biggest problem for Western buyers in 2025.
Who benefits is straightforward. For Lynas, the strategic value is another customer and processing route for its separated oxides. For LS Eco Energy, it provides access to non-Chinese feedstock for a metals business it is building toward magnets. For Vietnam, it creates an entry point into a technically difficult stage of the value chain. For magnet manufacturers, it offers material outside Beijing's licensing regime. The A$30 million cross-investment is a signal of intent rather than a financing event. The capital that matters is the plant itself and whatever follows it.
3. Why Vietnam is a credible location
The proposed facility is more credible because Vietnam already hosts the investors, infrastructure and manufacturing relationships required to support it.
LS Eco Energy is part of the LS Cable & System group, whose joint venture LS-VINA has made cable in Hai Phong since 1996 and describes itself as Vietnam's only ultra-high-voltage cable maker (LS-VINA). The project builds on existing sites, logistics and operating relationships rather than a new network.
Vietnam also has prior experience in rare earth manufacturing. Japan's Shin-Etsu Chemical completed a magnet plant in Hai Phong in 2016 and is doubling it to 2,200 tonnes a year as part of Japan's effort to diversify supply outside China (Shin-Etsu Chemical announcements). That is not a complete domestic supply chain, but it shows qualified rare earth manufacturing can operate in Vietnam.
The correct benchmark is not China, which remains larger, cheaper and more integrated. It is the other countries trying to attract the next non-Chinese plant. Vietnam begins with an operating industrial base. Many competitors begin with a policy target.
4. Where Vietnam can capture value
Demand gives the opportunity durability. McKinsey's Global Materials Perspective 2025 projects about 6 percent annual growth through 2035 for neodymium, praseodymium, dysprosium and terbium under its continued-momentum scenario, and still lists rare earths in deficit in its high-supply case (McKinsey, Exhibits 16 and 20).
Rare earth demand could approach twice its 2024 level by 2035. Slower electric vehicle adoption and alternative motor designs are the downside.
The plant gives Vietnam a position in the chain. It does not give Vietnam control of it. Under the initial structure, Australia supplies the material, Malaysia separates it, South Korean capital and expertise control processing, and foreign magnet companies provide demand. The technology, the intellectual property and the customer relationships stay offshore. LS Eco Energy's own magnet plans point the same way. It is in feasibility discussions for a permanent magnet plant in Virginia, not Vietnam (The Metalnomist, 22 May 2026).
The larger value sits in qualified magnets and components. Magnet makers work directly with automotive, robotics, aerospace, energy and defence customers, and a customer qualifies the plant and the process, not just the product. Those relationships create switching costs that contract processing never does.
Vietnam's pathway should therefore be sequential: metal production, then testing and specialist suppliers, then permanent magnets, then motors and components, and with them direct customer relationships.
5. Risks
Five risks could stall the plant or keep the value offshore. The register below sets out the warning indicator for each and the date that tests it. Impact and likelihood are VNANZ assessments, not company guidance.
6. Five milestones will prove or break the thesis
Five observable milestones will determine whether the thesis is progressing.
Binding agreements. Lynas and LS Eco Energy convert the framework into definitive investment, oxide-supply and processing contracts.
Commercial output. The Vietnamese facility produces samarium metal consistently at the required purity and volume.
Customer qualification. A permanent magnet or component manufacturer approves the Vietnamese material.
Product expansion. The facility adds NdPr, dysprosium or terbium production.
Magnet investment. A manufacturer commits capital to permanent magnet production in Vietnam.
The first four milestones would validate the plant's commercial viability. The fifth validates the wider Vietnamese industry thesis.
Conclusion
China's rare earth advantage is a manufacturing advantage, not a resource advantage. Another mine does not resolve it. The proposed Lynas and LS Eco Energy facility gives Vietnam a credible entry into the alternative: Australian material, Malaysian separation, South Korean capital and expertise, and a Vietnamese industrial base from which production can scale.
Vietnam does not need to reproduce China's entire industry. It needs to secure one constrained stage, prove it can deliver qualified material, and use that position to attract the next investment.
Metal production would make Vietnam useful to the alternative supply chain. Magnet production would make Vietnam difficult to replace.
General commentary only. Not financial product advice.