Here’s why Lynas Rare Earth (ASX:LYC) is trading higher

Highlights

  • Lynas Rare Earths Limited (ASX:LYC) has gained around ~28% in the last three months on the back of a strong FY2021.
  • LYC’s net profit during the financial year jumped by more than 700% as compared to previous financial year.
  • In August, China’s rare earth exports tumbled by 0.5% relative to previous month's export figures.

Shares of Western Australia-focused Rare Earth miner Lynas Rare Earths Limited (ASX:LYC) surged as much as 4.9% during an intraday session on Tuesday to trade at AU$7.30 per share.

The magnificent gain in the shares of the rare earth (RE) miner was witnessed despite no new update from the company. However, the rising share prices of the company could be a result of market-driven forces caused by the potential demand in the market and supply shortage.

Shares of LYC gained as much as ~28% in the last three months with a massive return of ~186% in the last year.

Also Read: Lynas (ASX:LYC) Scales Another All-time High, What You Need to Know?

Why are LYC shares trading high?

The significant surge in Lynas’ share prices could be due to positive sentiments of the investors after the release of profitable FY2021 results, announced by the company on 27 August 2021. The shares have gained more than 10% since the release of FY21 results.

Notably, the miner reported a record net profit growth of over 700% for the financial year relative to previous financial year. LYC achieved record sales in the June ending quarter with a significant increase in FY21 revenue, which landed at AU$489 million.

The company closed the financial year with cash and cash equivalents of AU$680.8 million, inclusive of AU$100 million held in short-term deposits.

Related Article: What powered Lynas Rare Earth (ASX:LYC) to boost its FY21 net profit

How is China helping RE miners to boost their share prices?

Container Ship Leaving the Port | Source: © Sofiaworld | Megapixl.com

As per the United States Geological Survey's latest records, China was the leading producer of rare earth elements in the world in 2020. The country also holds the world's largest reserves of rare earth elements and exports more than 40% of the world's total RE elements exports.

The country's RE element exports in August tumbled by 0.5% relative to previous month's export figures, as per the General Administration of Customs data. China's exports fell to their lowest level since April, creating a significant market deficit and pushing prices higher.

Related Article: Lynas (ASX:LYC) corrects after a strong run, bulls tired or taking a breather?

Bottom Line

Shares of Lynas Rare Earth have galloped on the back of the strong financial year 2021 results and a supply crunch in the market due to lower exports from China. However, LYC shares come down and settled at AU$7.020 on 08 September 2021.

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