At time of writing, the share price of Lynas Corporation Limited [ASX:LYC] is down a further 4.96%, trading at $2.30.
After shooting up towards the end of June, the Lynas share price has fallen sharply in the last two weeks as trade tensions ease (again).
You can see the timing of Trump policy pivots and subsequent movements in the Lynas’ share price over the last six months below:
The latest Lynas news is that Wesfarmers Limited [ASX:WES] has abandoned its $1.5 billion bid for the rare earths company. We discuss the regulatory situation in Malaysia and the impact of Trump.
Lynas share price falls after Wesfarmers bid dropped
It is possible the abandonment of the bid has removed a floor under the Lynas share price with negative momentum building.
On Thursday, Wesfarmers CEO Managing Director Rob Scott stated that the company was unable to progress its conditional proposal and had decided to drop the bid.
Previously, Lynas shareholders were particularly upset over discussions Mr Scott had had with the Malaysian Prime Minister regarding processing arrangements.
Last week Malaysia extended Lynas’ operating licence in Kuantan by six months subject to conditions which include the construction of a permanent disposal facility for the low-level radioactive waste.
In addition, a cracking and leaching plant must be built in Western Australia in the next four years.
Trump is the decisive factor for the Lynas outlook in the short-term
The outlook for Lynas in the short-term is all about reading the Trump tea leaves.
If you look at the annotation on the chart at the beginning of the article you can see Trump’s influence on the Lynas share price.
While there is no ‘chart’ of trade war tensions – it would be pretty safe to assume if there were, it would be positively correlated with the Lynas share price.
It seems investors are trading Lynas based on the perceived likelihood that Trump forces China into a curb on rare earths exports.
There haven’t been genuinely significant Chinese movements towards such a curb since Xi Jinping made a visit to a rare earths firm in May.
The South China Morning Post has recently reported that China is surveying seven regions for areas rich in deposits amid speculation of a future curb.
Citing the China Securities Journal, the paper also claims that an unidentified industry insider has said the National Development and Reform Commission (NDRC) survey could lead to a reduction in output due to a crackdown on illegal mines and rare earths trade.
If you want an in-depth look at rare earths supply and demand dynamics, as well as a further look at the strategic importance of the commodities, you should download our free report on rare earths. It compiles plenty of useful research and has some great charts, some of which you may not have seen before. It can be accessed here.
For Money Morning