Lynas Rare Earths Ltd (ASX: LYC) shares were among the market's biggest success stories of 2021.
The rare earths producer's share price rocketed more than 150% that year, seemingly largely driven by soaring investor sentiment. But both the stock's gains and the market's optimism proved slippery to hold.
The Lynas share price has tumbled 39% since early 2022 to trade at $6.77 right now – flat with its previous close.
Today's moves (or lack thereof) come amid news the company will welcome John Beevers to its board next month.
Comparatively, the S&P/ASX 200 Index (ASX: XJO) has slipped just 1% since January last year.
So, what turned the market away from its former darling? Before we get to that, let's look at what spurred investors' love for Lynas to begin with.
Investors loved Lynas shares …
As tensions between China and the rest of the world heated up in 2021, market watchers worried about the future supply of rare earths. Particularly, as the materials have an important role to play in the decarbonisation movement.
Lynas is the largest rare earths producer outside of China. It's that fact that likely led many market participants to bid its share price sky-high in recent years.
The company mines rare earth oxides in Western Australia before shipping the product to Malaysia, where it operates the world's largest rare earths processing plant.
However, recent happenings appear to have weighed on the market's appreciation for Lynas and its shares.
… until they didn't
Perhaps unsurprisingly, falling commodity prices are likely to blame for much of Lynas' downturn.
The company realised an average selling price of $52.50 a kilogram in the first half of financial year 2023. That was lower than its peak of $68.90 a kilogram in the second half of financial year 2022.
But major blows dinting the Lynas share price this year appear to have been outside the company's control.
The stock is currently 30% lower than its January peak amid news from electric vehicle giant Tesla Inc (NASDAQ: TSLA) and Malaysian authorities.
Tesla revealed plans to scrap rare earths from its next generation motor at its 2023 investor day. While experts assured investors the change likely won't impact demand for rare earths, it probably led some to worry that prior demand forecasts could have been overstated.
Meanwhile, Malaysia's Atomic Energy Licensing Board doubled down on banning the company from importing and processing lanthanide concentrate, starting in July. That means Lynas will be forced to close the cracking and leaching component of its Malaysia plant if its unsuccessful in appealing the decision.
All that appears to have weighed on the market's love for Lynas shares. But the stock hasn't lost the affection of Bell Potter.
What might the future look like for Lynas stock?
The broker recently upgraded the ASX 200 stock to a buy rating with an $8.06 price target, my Fool colleague James reports.
It believes the market overreacted to Tesla's announcement and notes the company still offers plenty of growth prospects.
