Lynas share price resets 52-week low twice in one week

March has been a shocker for this ASX rare earths share.

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Key points

  • The Lynas share price has fallen to a second 52-week low in just one week, touching $7.09 in late afternoon trading 
  • The biggest dampener on ASX rare earths shares is Tesla's announcement that it won't use batteries made with rare earths in its new EV models 
  • One expert says the market's reaction to Tesla's announcement is 'overblown' 

The Lynas Rare Earths Ltd (ASX: LYC) share price has reset its 52-week low twice in one week.

In late afternoon trading on Friday, the Lynas share price hit a new annual low of $7.09.

This is a 4.8% fall for the ASX rare earths share today and the second 52-week low for Lynas this week.

On Tuesday, Lynas shares fell to $7.26, beating their previous 52-week low of $7.28 in September 2022.

Since the start of March, Lynas has tumbled 13.5% in 10 days.

What's killing the Lynas share price?

Despite some positive price-sensitive news from Lynas this week, March has been a terrible month for the ASX rare earths share.

Lynas' woes began on 27 February when it revealed a 32% cost increase in its 1H FY23 results. ASX investors were disappointed with this news, and the stock fell by 6.2%.

A few days later, electric vehicle (EV) giant Telsa Inc (NASDAQ: TSLA) announced its next-generation powertrain, which is an internal car system, will use a permanent magnet motor with no rare earths.

Oh boy, investors didn't like the sound of that.

Other ASX rare earths shares also took a tumble on this news, which came out last Thursday.

Over Thursday and Friday, Lynas shares fell by 7%, and Arafura Rare Earths Ltd (ASX: ARU) shares fell by 15%.

Investors' concerns that Tesla's departure from the rear earths market would dampen demand appeared to carry into this week.

Lynas has continued to take a beating, down 6% over the past five days, while Arafura has recovered.

Experts say reaction to Tesla announcement is 'overblown'

As we reported yesterday, specialist critical minerals research and advisory firm Adamas Intelligence says the impact of Tesla's decision on the rare earths market is "expected to be minor".

A quick lesson in EV motors: Traditionally, they use magnets made from a rare earths alloy mix of neodymium, iron, and boron (NdFeB).

Adamas thinks Tesla will likely switch to ferrite magnets. But this is no big deal, they say.

Adamas says its research shows that Tesla represents only 2% to 3% of global NdFeB magnet demand (excluding micromotors, sensors and speakers).

What else is going on with Lynas?

Lynas is in the process of applying for an amendment to its renewed operating licence in Malaysia.

The Malaysian Government has decided to prohibit the importing and processing of lanthanide concentrate due to concerns over radioactive waste.

If Lynas can't get an exemption, it will have to close its cracking and leaching plant when the current licence expires at the end of FY23.

The silver lining for the Lynas share price

According to one broker, Lynas shares are still a buy despite the latest challenges shaking the share price.

Shaw and Partners portfolio manager James Gerrish says:

Tesla, and EVs in general, are just one of many demand sources of rare earth materials. We continue to like Lynas, the biggest player in the space outside of China.

While there are some risks around execution with the new Kalgoorlie plant, we think the market is taking a harsher view than what the company will deliver.

So, for long-term believers in rare earths, this could be a great buy-the-dip opportunity for Lynas shares.

Over the past 12 months, Lynas shares have lost more than 30% of their value.

In other news relating to EVs today, ASX 200 lithium shares are being hammered after the price of carbonate fell to its lowest level in more than a year.

This is contributing to a 3.26% decline in the S&P/ASX 200 Materials Index (ASX: XMJ) today.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. 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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