Lynas (ASX:LYC) share price jumps 6% to new 52-week high

The Lynas (ASX:LYC) share price is surging to a new 52-week high today. We take a look at what's been happening with the rare earths producer.

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published March 3, 2021 2:44 pm AEDT

Lynas Rare Earths Ltd (ASX: LYC) shares have surged higher today to set yet another new 52-week high. At the time of writing, the Lynas share price has climbed 6.04% to a five-year high of $6.67.

It feels like only a couple of weeks that Lynas shares set a new 52-week high. Probably because it was only weeks ago, as a colleague covered here. Since recovering from its March lows, the Lynas share price has gone from strength to strength.

So, what is driving this sustained rally?

Top asx share price represented by paper cutout image of mountain peaks with red flag — Image source: Getty Images

Geopolitical tensions remain high

The United States and China continue to squabble over trade and rare earths are no exception. As a result, the US has been making a concerted effort to reduce its reliance on China's supply. Lynas has been well-positioned in this regard, being the only major rare earth supplier outside of China.

Supply is critical due to the large number of use cases for rare earths. These range from electric vehicles to weaponry systems.

As such, in January this year, Lynas was awarded a contract with $30 million of funding from the US Department of Defence to build a rare earths processing facility in Texas.

The Lynas share price could also be getting a boost from the recent developments in Myanmar. As The Australian Financial Review reported, Myanmar has been in a state of chaos after a coup erupted on 1 February. Although it is expected that China's rare earths immediate supply will remain uninterrupted, historically it has been heavily dependent on rare earth ores from Myanmar.

Increasing demand boosts Lynas share price

As electric vehicles continue to become more popular, along with more renewable energy sources, the demand for rare earths continues to climb.

Based on a Refinitiv Datastream extract posted by Reuters, Neodymium Oxide and Yttrium Oxide have both experienced recent surges in demand and price.

When increasing demand is combined with a suppressed supply, the outcome is increasing prices. The question is whether there will be more suppliers popping up to meet demand.

Lynas share price snapshot

Over the past year, the Lynas share price has skyrocketed by 290%. Year to date, Lynas shares are also up by nearly 60%.

Based on the current share price, the company has a market capitalisation of around $5.67 billion.

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