The Lynas Rare Earths Ltd (ASX: LYC) share price is crashing to a two-week low today amid ASX lithium shares going into meltdown.
The sharp sell-off appears to be triggered by a warning from Goldman Sachs that calls time on the battery metals bull market.
Mind you, the minerals that Lynas sells aren't used to make batteries. Battery metals are lithium, nickel, and cobalt.
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Lynas share price: guilt by association
Lynas is a rare earths miner. It's the world's second-largest producer of Neodymium and Praseodymium (NdPr) used in magnets. Magnets are essential in electric motors.
This distinction seems to be lost on the market today. The Lynas share price tanked to a low of $9.15, down 7%, before edging back to $9.31 at the time of writing — 5.48% lower.
That isn't as bad as ASX lithium and nickel miners. The IGO Ltd (ASX: IGO) share price reversed 11%, the Allkem Ltd (ASX: AKE) share price is down 12.5%, and Pilbara Minerals Ltd (ASX: PLS) is 19.32% lower at the time of writing.
Peak of the lithium boom
Goldman reckons investors have chased ASX battery metal miners to extremes in their rush to get on the green revolution bandwagon, pulled by electric vehicles.
The broker said:
That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend in focus.
In this context, we see prices on a downward trajectory over the course of the next two years, with a sharp correction in lithium.
Goldman is forecasting lithium prices to average US$53,982 a tonne in 2022 and US$16,372 in 2023. This compares to the current spot lithium price of US$60,350 a tonne.
The broker also thinks cobalt and nickel prices will also come down from their current spot prices. Although the falls aren't as dramatic.
Why the Lynas share price is suffering
As mentioned, Lynas does not produce these metals. But in a panic sell-off when everyone is rushing for the exits, anything linked to EVs gets trampled on.
Interestingly, the old school polluting commodities are faring better. This includes ASX energy shares and the iron ore majors.
For instance, both the Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) share prices are up, 0.24% and 0.02% respectively.
Meanwhile, the Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) share prices also gained 3% and 1.54% respectively.
However, the drop in the Lynas share price shouldn't worry longer-term investors. The company's shares are still up 76% over the past 12 months when the S&P/ASX 200 Index (ASX: XJO) is sitting on a 1% gain.
