Why did the Lynas Rare Earths (ASX:LYC) share price surge 155% in 2021

a bearded man sits at his desk with hands behind his head and feet on his desk smiling widely while looking at his computer screen which has market data on it, indicating a please share price rise.

The Lynas Rare Earths Ltd (ASX: LYC) share price stormed ahead in 2021, consistently ascending throughout the year.

The company’s share price soared over the calendar year from $3.98 to $10.17, a 155.5% rise. In contrast, the S&P/ASX 200 Index (ASX: XJO) gained around 13%.

Let’s take a look at what attracted investors to the company during the year.

Demand for rare earth minerals

The Lynas Rare Earths share price had a strong start to the year. While it plateaued during May and June, it surged to yearly highs for the rest of the calendar year. In fact, it was one of the best performers on the index in 2021 due to high demand and prices for its materials.

The company is the world’s second-largest producer of rare earth materials used in electronics, wind turbines, and hybrid and electric vehicles. These include neodymium and praseodymium, lanthanum, cerium, and mixed heavy rare earths. The company owns the Mt Weld Concentration Plant in Western Australia and a manufacturing facility in Malaysia.

The year started on a high for Lynas with prices surging in January on the back of the company signing a contract with the US government to build a commercial light rare earths separation plant in Texas.

Also that month, the company released its quarterly report, showing an $87 million boost in revenue from its previous quarter.

However, in April, the share price shed dramatically after the company released its next quarterly update. This revealed Chinese competitors Northern Rare Earth would be doubling production within three years. Between market close on April 19 and April 22, the company’s share price dropped 16.77%.

The share price recovered and plateaued in May and June before a major surge in July. Shares skyrocketed 28% between July 20 and the end of the month following the awarding of a $14.8 million federal government grant and a positive quarterly update.

The results boasted a record $185.9 million in sales revenue, reflecting stronger demand and pricing for the company’s rare earth materials.

November saw the Lynas share price explode 21% higher, spurred by the increasing prices of rare earth commodities. Also, during the month, the company signed a letter of agreement with Japan Australia Rare Earths. The letter affirmed long term support for Lynas and a pledge for the companies to continue to work together.

Finally, December saw the company continue to hit 52-week highs. Between December 20 and the final day of the year, the company’s shares surged 13%. This was despite only one price sensitive announcement from the company on December 30.

At that time, the company revealed its Malaysian permanent disposal facility for water leach purification residue had received regulatory approval. Upward pricing of neodymium, and, indirectly, lithium, may also have spurred the share price surge.

As my Foolish colleague Zach noted, rare earths are integral components of lithium-type batteries. And demand for battery metals has surged in recent years as the popularity of electric vehicles grows.

Lynas share price recap

The Lynas share price gained an impressive 132 percentage points more than the broader ASX 200 Index in 2021.

The company has a market capitalisation of nearly $10 billion based on its current share price.

Since market close on December 31, the Lynas share price has gained 6.24%. Despite this, the company’s shares are flat today at $11.03 at the time of writing.

The post Why did the Lynas Rare Earths (ASX:LYC) share price surge 155% in 2021 appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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