Australia's Lynas Rare Earths Ltd (OTCPK: LYSCF) officially terminated confidential discussions with U.S.-based MP Materials Corp (NYSE:MP), ending speculation about creating a rare earths leader.

The two producers have a combined market cap of $6.44 billion, commanding the largest influence on that market outside of China.

"Lynas confirms it has held confidential discussions with MP Materials Corp regarding a potential transaction, however, these discussions are not ongoing," its management stated in a press release.

China currently dominates the rare earths market, controlling around 87% of global refining capacity, with even large operators like MP Materials relying on the country's support. In 2022, MP Materials sent around 43,000 tons to Chinese refineries.

As the slowdown  economy, the prices of rare earths have sharply dropped. Despite the calamity, China continued banning exports, adding the technology to make rare earth magnets to that list.

"What's happened in China over many years is that they've invested heavily and cleverly in the processing capacity to convert the (rare earths) material all the way from the mine through to the magnet," Dr. Allan Walton, a metallurgy professor at the University of Birmingham explained for Reuters.

While a potential merger between Lynas and MP Materials could challenge this dominance and help the West strengthen supply chains, some experts wondered whether the merger was worth it.

"I wouldn't think there is a whole lot of synergies out of that, just consolidating supply," Argo Investments portfolio manager Andy Foster said.

"As a shareholder, what's the real benefit? Lynas has one of the best rare earths deposits in the world. I get the consolidation argument, but I'm not sure about any strategic value transfer," he added.

Lynas operates the Mount Weld mine in Western Australia, considered one of the world's premier rare earths deposits, and the world's largest single rare earths processing plant in Malaysia. It also secured a 149-acre greenfield site in Texas for a planned heavy rare earths facility.

Reuters reported a source that suggested a deal would have involved Lynas delisting in Australia, with MP Materials maintaining its New York Stock Exchange listing, aiming for completion in the first quarter. However, anti-trust regulations and the complexities of aligning interests posed substantial hurdles.