Why did the Lynas share price lose 5% on Monday?

Lynas shares dropped heavily on Monday. What went wrong?

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published August 22, 2022 5:00 pm AEST

Well, it ended up being a pretty dreadful start to the trading week for the S&P/ASX 200 Index (ASX: XJO) and ASX shares. At market close, the ASX 200 ended up losing 0.95% and dropped back down to 7,046.9 points. But it was far, far worse for the Lynas Rare Earths Ltd (ASX: LYC) share price.

Lynas shares had a shocker in Monday's session. The rare earths processor ended up closing at $9.19 by the end of the day, down a painful 5.45%.

So what went wrong for Lynas today?

A man wearing a hard hat stands in front of heavy mining machinery with a serious look on his face. — Image source: Getty Images

What happened to the Lynas share price on Monday?

Well, it's rather hard to say despite the size of Lynas' drop. The company hasn't put out any ASX releases or announcements since 12 August.

There has been recent talk about what the future for companies like Lynas might hold though, which could be flowing into investor sentiment. For example, earlier this month, my Fool colleague Brendon discussed the potential of graphene-based batteries to displace the current lithium-ion technology.

Electric vehicles, most of which are powered by lithium-ion batteries, depend heavily on the kinds of rare earths that Lynas processes. But given that rare earths are used in the charging mechanism for electric batteries and not in the batteries themselves, it's unlikely this angle is what is causing the weakness in Lynas shares today.

So perhaps it is just the general distaste for mining and materials companies that investors seemed to have developed today that dragged Lynas down. Lynas was by no means the only share in its sector to have shown weakness.

We also saw big falls in companies ranging from Newcrest Mining Ltd (ASX: NCM) and Neometals Ltd (ASX: NMT) to Piedmont Lithium Inc (ASX: PLL) and Coronado Global Resources Inc (ASX: CRN).

The large miners BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) also finished in the red, but not nearly as deeply as Lynas.

So perhaps it was just the negative sentiment we've seen across the mining and materials sector that put a dent in the Lynas share price today. This latest fall puts Lynas shares at a year-to-date loss of 16.68% in 2022 thus far. At the current share price, Lynas has a market capitalisation of $8.29 billion.

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