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How is the Lynas share price performing against its sector this month?

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The Lynas Rare Earths Ltd (ASX: LYC) share price has tumbled in June followed by a broader market decline.

The negative sentiment across the ASX appears to be coming from news of a potential recession in the United States.

The popular saying, “When America sneezes, Australia catches a cold” has led investors to switch to safe-haven assets.

As such, the rare earths producer’s shares are trading at $8.30, which means they are down almost 16% in June so far.

In comparison, Iluka Resources Limited (ASX: ILU), and Arafura Resources Limited (ASX: ARU) shares have also fallen in June. They are currently down 21% and 43% respectively.

Both are competitors to Lynas in the rare earths market but are some distance away from being a threat.

When looking at the sector as a whole, the S&P/ASX 200 Materials (ASX: XMJ) index has dipped 13% over the past three weeks.

What’s happened with Lynas lately?

Despite the company announcing a major deal with the US Government last week, the Lynas share price has tanked.

The release was particularly positive given that Lynas depends on China for final separation of its heavy rare earths.

In the past, China has weaponised rare earths supply to the market. And if geopolitical tensions reach boiling point in future, it is likely to happen again. This has caused Western analysts to rethink their strategy to secure the crucial commodity.

To put that into perspective, heavy rare earths are used in cutting-edge weapons and communications systems. This includes electrical power systems and magnets in the advanced, fifth-generation F-35 fighter jet.

In what should have been a day in the green for Lynas shares, investors shrugged off the good news.

It is worth noting that Lynas is the world’s second-largest producer of Neodymium-Praseodymium (NdPr), behind China. The Asian powerhouse accounted for 60% of global production of rare earths last year.

Despite its recent slump, the Lynas share price has soared by more than 50% over the past 12 months.

The company’s shares touched a multi-year high of $11.59 in April 2022 before treading lower in the following months.

Lynas has a price-to-earnings (P/E) ratio of 28.41 and commands a market capitalisation of roughly $7.55 billion.

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