Shares of Molycorp Inc MCP.N fell more than 18 percent on Tuesday after a JPMorgan analyst downgraded the stock to "neutral" on rare earth pricing and demand concerns.
In a note to clients, mining analyst Michael Gambardella wrote that rare earth prices have fallen substantially since hitting highs in July and that forecast demand outside China is down this year. He cut his price target for the company to $66 from a previous $105.
Shares of Molycorp tumbled 18.4 percent to $43.27 on Tuesday on the New York Stock Exchange.
Gambardella noted that 2011 rare earth demand outside of China has dropped to 40,000 tonnes from earlier estimates of 60,000 tonnes, according to industry specialist IMCOA.
Rare earth oxide and metal prices spiked earlier this year as China, which produces about 95 percent of the world's supply, repeatedly clamped down on exports.
This has left users elsewhere scrambling to secure reliable supplies of rare earths, which are used in a range of high-tech products from smartphones to hybrid cars.
U.S. trade officials are also expected to announce a major trade enforcement action on Tuesday that could target China's export restrictions on rare earths.
Molycorp currently produces rare earth products from stockpiled concentrate. The company is in the process of a $781 million expansion and modernization of its Mountain Pass mine and processing facilities in California.
(Reporting by Julie Gordon; editing by Rob Wilson)