Lynas Share Price Up on US Facility Go Ahead: Two Factors to Consider

At time of writing, the share price of Lynas Corporation Ltd [ASX:LYC] is up more than 10%, trading at $2.39.

Today, the company announced it has signed a deal with US DOD for Phase I of its US processing facility.

We take a quick look at two factors that could drive the LYC share price higher in the months and years ahead.

You can see a brief history of what’s happened with LYC shares over the last year and a half below:

Source: tradingview.com

The LYC share price bounced strongly from the March market lows, even as the coronavirus halted operations at their Malaysian plant.

2015 may prove to be the year LYC shares bottomed out.

Anyway, here’s what you should keep an eye out for going forward.

Factor #1: Politics is the primary factor driving the LYC share price

The chart says it all.

The rare earths used in EV permanent magnets is the long-term driver of Lynas’ prospects, but in the immediate future politics is everything for this company.

Hawkish Republican Senators pushed hard to get the Department of Defence to award the contract Lynas won today to a US-based company.

These Senators wanted to have a wholly US-based supply chain in place.

Apparently even major allies like Australia aren’t good enough, because of their operations in Malaysia.

Either way, the US Senators’ purity test qualms were pushed to one side it seems, as Lynas got the go ahead.

US Secretary of State Mike Pompeo tweeted his support for the partnership, so there appears to be divisions on the right of US politics around this topic.

Lucky for Lynas, the ones in charge of the decision got their way.

Pompeo would know a thing or two about the issue given his role as the former Director of the Central Intelligence Agency (CIA).

Factor #2: US-China-Australia bizarre love triangle is starting to skew

The US-China-Australia relationship is a bizarre love triangle, and it’s starting to skew.

For decades the US wanted cheap Chinese goods and had hopes it would reform.

Australia provided the commodities to make these goods and is now increasingly in the middle.

Recent political moves are evidence that Australia is increasingly favouring its security partner more than its trade partner.

And things are looking more and more like the relationship could be permanently broken.

If you want to understand what triggered this shift, you can find out more here.

Regards,

Lachlann Tierney,
For Money Morning