It's been a fairly smooth and positive day for the S&P/ASX 200 Index (ASX: XJO) this Tuesday. At the time of writing, the ASX 200 has gained a healthy 0.65% and is back over 7,000 points. But the Lynas Rare Earths Ltd (ASX: LYC) share price can't say the same.
Lynas shares are presently in the green, up 0.17% to $8.84 per share. However, it has not been plain sailing for Lynas shares. The rare earths producer has had several stints in both positive and negative territory over the session in a display of some rather wild volatility.
Lynas opened at $8.91 a share this morning after closing at $8.82 yesterday. But the company initially plunged just after market open, sinking as low as $8.70 a share. Lynas shares quickly saw a rebound and spent a few hours in the green.
But a sharp drop just after midday put Lynas back in the red. However, the shares have rebounded higher again over the afternoon to the current levels we see.
So what on earth is going on with this company that might have prompted such dramatic volatility?
Well, it's hard to know for sure. Lynas shares have something of a reputation for volatility at the best of times. After all, this is a company with a 52-week share price range of $6.21-$11.59.
However, we did see an ASX release out of the company at 11:56 am which might give us something of a logical explanation.
Lynas share price whipsaws as company faces water shortage
So this release informed investors of "significant water supply disruption issues affecting production at the Lynas Malaysia plant".
Here's some more of what the release said:
During July and August 2022, water supply from PAIP [Lynas' local water supplier] was unpredictable and on most days below the level required to run all 4 kilns…
Normal water supply was expected to resume during September 2022, which would have enabled the shortfall from July and August to be mitigated.
Following a catastrophic equipment failure in early September, PAIP has not supplied any water for 7 days… PAIP has now provided an update that the current situation of zero supply is expected to continue for at least the next week.
Lynas expects that water supply from PAIP will remain unpredictable until at least the end of September 2022… The PAIP water supply issue will significantly affect production during this quarter. However, with the implementation of additional strategies, the effect on the full year result is not expected to be material.
So not good news for Lynas. This probably explains the spike in volatility we saw around the time that this announcement was released.
The company has reassured investors that the impact of this water shortage "is not expected to be material". But even so, it still seems to have given at least some investors concerns, going off of the share price movements we've seen.
The Lynas share price remains down 20.4% so far in 2022. At the current pricing, this ASX 200 rare earths producer has a market capitalisation of $7.92 billion.
