Lynas (ASX:LYC) share price hits multi-year high as China moves to squeeze rare earth supply

The Lynas share price hit a multi-year high today following news that China is going to pull back its rare earth exports.

| More on:
man walking up line graph, into clouds, representing asx shares at an all time high

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Lynas Rare Earths Ltd (ASX: LYC) share price finished off at $6.11 today having powered up over 13% to reach its highest price since May 2013.

Lynas has a portfolio of aligned assets to explore, develop, mine and process rare earth minerals. Its main asset is the Mt Weld rare earth deposit in Western Australia.

So what sent the Lynas share price to the sky today?

Lynas share price soars as China fights with the US

According to the Australian Financial Review (AFR), China wants to curb the exports of rare earth minerals that are crucial to US defence contractors such as Lockheed Martin Corp. 

These rare minerals are used to manufacture sophisticated weaponry and F-35 fighter jets. Fighter jets, for example, rely heavily on rare earths for critical components such as electrical power systems and magnets. 

According to the AFR, a Congressional Research Service report said each F-35 required 417 kilograms of rare earth materials.

China has been setting rare earth production limits since 2007 and currently controls about 80% of the world’s supply.

Lynas steps in to accommodate US Defense Department

Last month, Lynas was awarded $30 million in funding from the US Department of Defense to build a light rare earths facility in Texas.

Outside of China, Lynas is the only other major rare earths producer. 

Considering the Lynas share price movement today, perhaps the market believes that China will restrict future supplies? 

In the instance that China decides to do exactly that, Lynas will be one of the only contenders capable of picking up the slack.

Foolish takeaway

Rare earth minerals don’t just build military gear, they are also used to manufacture many other products such as smartphones, electric vehicles and wind turbines.

Regardless of today’s China news, the Lynas share price had already been rising for the past year off the back of increasing demand. Lynas shares have gained 182% over the past 12 months.

Over the past month, the Lynas share price is up 38%.

More on Share Market News

Three businesspeople leap high with the CBD in the background.
Share Market News

‘We’ve become the piggy bank’: GQG share price jumps on half-year results

The fund manager's earnings have pleased investors. Here are the details.

Read more »

A Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share prices
Opinions

Loss-making ASX shares: Big investment opportunity or extreme risk?

Is it time to look at the unloved growth shares?

Read more »

A doctor appears shocked as he looks through binoculars on a blue background.
Broker Notes

Goldman Sachs gives its verdict on the CSL share price

Where next for CSL's shares?

Read more »

A man in a business suit scratches his head looking at a graph that started high then dips, then starts to go up again like a rollercoaster.
Dividend Investing

‘Misunderstood’: Expert names dividend ASX share to buy now at price dip

Reliable income producers aren't easy to find. Here's a stock that is cheap enough to pick up at the moment…

Read more »

A business woman looks unhappy while she flies a red flag at her laptop.
BNPL shares

Top broker warns that the Zip share price could sink 43%

Are Zip's shares heading lower from here?

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank representing bank dividends and in particular the CBA dividend
Bank Shares

Is the CBA share price a buy after the bank’s FY22 results?

Is now a good time to buy CBA's shares?

Read more »

Three people run in a race through deep mud and puddles of water.
Investing Strategies

3 rising ASX shares to buy that have passed the bottom: expert

Grab these recovering stocks before they become even more expensive, says Michael Gable.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin.
Share Market News

5 things to watch on the ASX 200 on Thursday

There are some big results awaiting the ASX 200 on Thursday...

Read more »