Here's why the Vulcan Energy share price is sinking 12% today?

Vulcan Energy shares have taken a pounding in recent times.

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Key points

  • Vulcan Energy shares are outpacing the broader ASX market to fall 12.36% to $5.635 
  • Weakened investor sentiment amid a possible recession in 2023 has had a detrimental impact on the market today 
  • Vulcan Energy shares hit a fresh 52-week low of $5.225 during the first 30 minutes of trade 

The Vulcan Energy Resources Ltd (ASX: VUL) share price is deep in the red on Tuesday despite no company announcements.

At the time of writing, the clean lithium developer's shares are down 12.36% to $5.635. But earlier, Vulcan Energy shares reached a new 52-week low of $5.225.

For context, the broader S&P/ASX 200 Index (ASX: XJO) is sinking 4.37% to 6,629.2 points following heavy falls on Wall Street overnight.

Vulcan Energy shares plummet to 52-week low

Investors are heading for the exits, sending the Vulcan Energy share price to a new 52-week low earlier in trade on Tuesday.

Fears are mounting about an incoming recession next year as inflation continues to spike across global economies.

Last Friday, the release of the United States consumer price index report indicated that inflation rose 8.6% in May. This was above the 8.3% forecast and the highest level in 41 years.

Subsequently, economists are predicting that a recession will likely occur in the early part of 2023.

The Federal Reserve is now more than likely to quickly raise the official cash rate to help ease inflationary pressures. However, this spells bad news for stocks as investors jump ship to better risk and reward alternatives such as government bonds.

With the Dow Jones entering bear market territory, the ASX has followed suit.

The old age saying, "When America sneezes, Australia catches a cold" couldn't be more right.

The S&P/ASX 300 Metals and Mining (ASX: XMM) industry is currently down 5.81% to 5,654.5 points. This represents a fall of close to 8% in the past week.

Late last month, Goldman Sachs released a bearish report on lithium which sent shockwaves across the battery metals market.

The broker forecasted that lithium prices will sink to around US$16,000 per tonne in 2023. This is a stark contrast compared to the US$71,000 per tonne that is being traded at the moment.

It's no wonder that with all this negative sentiment that Vulcan Energy shares touched a 52-week low of $5.23 today.

About the Vulcan Energy share price

Since this time last year, the Vulcan Energy share price has dropped by 36% following a difficult couple of months.

Based on today's price, Vulcan Energy presides a market capitalisation of approximately $741.82 million.

Motley Fool contributor Aaron Teboneras 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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