Lynas Shares Face Mounting Pressure Amid Production Setbacks

The Australian rare earths producer Lynas Rare Earths Ltd. is experiencing a period of significant market turbulence. Having soared approximately 130% in 2024, the company's equity has now surrendered more than 40% of its value since peaking in October. In the latest session, shares closed at AUD 12.19, marking a 1.3% decline and leaving investors to question where support might ultimately be found.

Two primary factors are driving the current downturn. First, investors are capitalizing on gains following the stock's parabolic advance earlier in the year. Second, and more pressingly, operational disruptions have introduced fresh uncertainty. Production issues at the crucial Kalgoorlie processing facility, triggered by power outages, have raised concerns about near-term supply reliability. This has shifted market control firmly into the hands of sellers, as evidenced by the share price's inability to reclaim the AUD 13.00 level after falling from its mid-October high of AUD 21.64.

Divergent Views from Market Experts

Analyst perspectives on Lynas's valuation present a stark contrast. UBS maintains a bullish stance with a price target of AUD 17.70, implying a potential upside of about 45%. The bank cites the company's strategic role in global supply chains and its unique technical expertise. Similarly, Macquarie expresses confidence with a AUD 17.00 target, anticipating continued tightness in the rare earths market.

Adopting a more cautious view, Ord Minnett advises investors to take profits. Their assessment suggests the valuation has become stretched following the 130% rally. This divide highlights the core tension for Lynas: substantial long-term growth potential driven by geopolitical demand versus the risks of a market that may have overheated after a massive run-up.

Should investors sell immediately? Or is it worth buying Lynas?

Long-Term Fundamentals Remain Intact

Despite short-term headwinds, Lynas's fundamental investment thesis continues to be supported by powerful geopolitical trends. Western nations are actively seeking to diversify their supply chains for rare earth elements, which are critical for electric vehicles, wind turbines, and defense technologies. This strategic shift, amplified by ongoing trade tensions between the U.S. and China, sustains robust demand for non-Chinese sources like Lynas.

In the immediate term, all eyes are on the company's ability to stabilize operations at Kalgoorlie. The market awaits concrete updates on resolving the production interruptions.

Technical Picture Shows Weakness

From a chart perspective, Lynas shares are navigating a critical juncture. The recent decline has pushed the price below both its 50-day and 100-day moving averages, signaling technical deterioration. The AUD 12.00 level is now viewed as the next significant support zone; a breach below this point could trigger further selling pressure. Conversely, a sustained move back above the AUD 13.00 threshold would be an initial sign of stabilization.

The coming weeks will test whether the long-term growth narrative is resilient enough to withstand the current operational challenges. The path forward will likely be determined by progress at the Kalgoorlie plant and the broader evolution of the geopolitical landscape.