Why is Lynas stock price so volatile on Tuesday?

It was a rather calm and positive day for the S&P/ASX 200 Index (ASX: XJO) on Tuesday. At the time of writing, the ASX 200 has gained 0.65% and is back over 7,000 points. But the Rare Earths Lynas Ltd (ASX:LYC) stock price can’t say the same.

Shares of Lynas are currently in the green, up 0.17% at $8.84 per share. However, it hasn’t been easy for Lynas’ actions. The rare earth producer had several moves into positive and negative territory during the session in a display of rather wild volatility.

Lynas opened at $8.91 per share this morning after closing at $8.82 yesterday. But the company initially plunged just after the market opened, falling to $8.70 per share. Lynas shares quickly rebounded and spent a few hours in the green.

But a sharp drop just after noon put Lynas back in the red. However, stocks rebounded again during the afternoon to the current levels we are seeing.

So what is going on with this company that could have caused such dramatic volatility?

Well, it’s hard to know for sure. Lynas stocks have a reputation for volatility at the best of times. After all, this is a company with a 52-week price range of $6.21 to $11.59.

However, we have seen an out-of-company ASX version at 11:56, which might give us a logical explanation.

Lynas’ share price soars as company faces water shortage

This statement therefore informed investors of “significant water supply disruption issues affecting production at the Lynas plant in Malaysia”.

Here’s a bit more of what the statement said:

During the months of July and August 2022, the water supply of the PAIP [Lynas’ local water supplier] was unpredictable and mostly below the level required to run all 4 ovens…

The normal water supply was to resume in September 2022, which would have made it possible to make up for the deficit in July and August.

Following a catastrophic equipment failure in early September, PAIP did not supply water for 7 days…PAIP has now provided an update stating that the current zero supply situation is expected to continue for at least the next week .

Lynas expects the PAIP water supply to remain unpredictable until at least the end of September 2022… The PAIP water supply problem will significantly affect production during this quarter. However, with the implementation of additional strategies, the effect on the full year result is not expected. be material.

So not good news for Lynas. This likely explains the spike in volatility we saw around the time of this announcement (despite its non-price sensitive tag).

The company reassured investors that the impact of this water shortage “is not expected to be significant”. But even so, it still seems to have given investors at least some concern, based on the stock price moves we’ve seen.

Lynas’ stock price remains down 20.4% so far in 2022. At the current price, this ASX 200 rare earth producer has a market capitalization of $7.92 billion.