Why did the Lynas share price dive 8% today?

The rare earths producer suffered along with the broader market on Friday.

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a group of business people sit dejectedly around a table, each expressing desolation, sadness and disappointment by holding their head in their hands, casting their gazes down and looking very glum.

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It’s been a particularly depressing day today for the S&P/ASX 200 Index (ASX: XJO) and ASX shares. The ASX 200 recorded a loss of 1.25% to close under 7,000 points. But one ASX 200 share fared far worse today. That would be the Lynas Rare Earths Ltd (ASX: LYC) share price.

Lynas shares ended the day down by a painful 5.72% at $8.57 a share. It was even worse for investors earlier in the trading day too. At one point, Lynas shares hit $8.31 each, which was a loss of more than 8.5% at the time.

So what on earth has gotten investors so pessimistic over this rare earths producer all of a sudden? Well, it’s not entirely clear. We do know that it has nothing to do with anything out of Lynas directly.

Saying that, we saw something of a trend on the markets today which could provide some insight into Lynas’ predicament.

It seems that any ASX share that investors associate with battery technology took a whack today, not just Lynas. For example, lithium shares like Pilbara Minerals Ltd (ASX: PLS) fell steeply. Pilbara was down more than 6% at one point today before closing down 1.75% at $2.25.

Battery company IGO Ltd (ASX: IGO) was also down more than 5% at one stage and ended the day 2.39% lower at $11.42.

This could be a consequence of the warning that broker Goldman Sachs put out earlier this month. Around the start of June, Goldman warned that its analysts believe lithium prices are peaking and “will fall heavily over the coming years”.

Lynas isn’t directly involved in lithium production. But its rare earths minerals have similar future-facing applications.

So this might explain the weakness in the Lynas share price, and in other battery materials shares, that we saw this Friday.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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