Driven by equipment updates and “trade-in” policies, demand for new energy vehicles, 3C electronics, energy-saving motors, wind power generation, etc. is expected to pick up, and downstream demand is expected to continue to improve, which is expected to drive growth in demand for rare earth products.
The Zhitong Finance App learned that Orient Securities released a research report stating that in the current context of carbon neutrality and economic recovery, fields such as new energy sources, energy saving and environmental protection are contributing the main marginal increase in demand for rare earths. Driven by equipment updates and “trade-in” policies, demand for new energy vehicles, 3C electronics, energy-saving motors, wind power generation, etc. is expected to pick up, and downstream demand is expected to continue to improve, which is expected to drive growth in demand for rare earth products.
As an important strategic reserve resource, recycling of rare earth waste has become an important complement to the supply of native rare earths under the current trend of shrinking domestic mining indicators and declining imports. In the past few years, prices in the rare earth market have continued to decline, and the performance of recycling companies has been affected. Against the backdrop of an improvement in the rare earth supply and demand structure and a steady recovery in market prices, rare earth recycling companies are expected to benefit and focus on recovering the performance of related enterprises.
Recommended attention: Huahong Technology (002645.SZ), a leader in rare earth recycling and permanent magnet materials; Sanchuan Wisdom (300066.SZ), which lays out mergers and acquisitions to recycle rare earths and continue to expand production capacity through technological transformation.
Incident: On April 7, the rare earth price index released by the China Rare Earth Industry Association was 164.80 points. It has been rising for 6 consecutive trading days since March 27, with a cumulative increase of 5.8%.
The main views of Orient Securities are as follows:
The growth rate of total mining control indicators has slowed, imports have decreased, and the rare earth supply and demand structure may improve
In recent years, China's rare earth mining index has been growing steadily. The total rare earth mining control index increased from 105,000 tons in 2016 to 255,000 tons in 2023, and the CAGR reached 14%. The total mining index mainly focuses on light rare earths. By 2023, the total light rare earth mining control index accounted for 92% of the total mining control index. In 2020-2023, 100% of the increase in total mining control indicators came from light rare earths, which relaxed the supply of light rare earths to a certain extent. Starting in 2023, the year-on-year growth rate of the total light rare earth mining control index began to slow. In the first batch of indicators in 2024, the growth rate of the total light rare earth mining control index fell to 14.5%.
On the import side, Myanmar's rare earth oxide supply fluctuates greatly due to factors such as the epidemic and local political situation, and there is a certain risk in supply. From January to February 2024, the amount of unlisted oxidized rare earths imported from Myanmar was 5,529 tons, a decrease of 393 tons compared to the same period in 2023 (-6.6% year over year). In addition, US rare earth imports are also declining. From January to February 2024, the number of rare earth ores imported from the US was 7,605 tons, a decrease of 5,207 tons compared to the same period in 2023 (-40.6% year over year).
It is expected that during the “14th Five-Year Plan” period, domestic rare earth supply may still be affected by both restrictions on total mining targets and a decrease in imports, and the rare earth supply and demand structure will begin to improve from excess to balance.
Rare earth prices have stopped falling and rebounded, and an inflection point may have arrived
Since the beginning of 2023, the phased supply of light rare earths such as praseodymium and neodymium has been relaxed, compounded by sluggish downstream demand, and market prices have continued to decline. The market price of praseodymium oxide fell from a high of 1.09 million yuan/ton to 1.11 million yuan/ton at the end of February 2022 to 340,000 yuan/ton to 360,000 yuan/ton at the end of March 2024, a drop of nearly 70%. Since entering April, light rare earth prices have stopped falling and rebounding. On April 7, praseodymium oxide was 364,000 yuan/ton to 384,000 yuan/ton, a significant increase (+6%) from 344,000 yuan/ton to 364,000 yuan/ton on March 29.
Furthermore, according to the April rare earth product listing price recently released by Northern Rare Earth (Group) Hi-Tech Co., Ltd., the price of praseodymium oxide products was 365,700 yuan/ton, and the prices of praseodymium products remained flat month-on-month, ending the previous three-month decline and boosting confidence in the spot market.
The growth rate of total mining control indicators has slowed down, imports have declined, and supply has begun to shrink
In the context of dual carbon and global economic recovery, downstream demand for rare earths continues to improve. In particular, driven by equipment updates and “trade-in” policies, demand for new energy vehicles, 3C electronics, energy-saving motors, wind power generation, etc. is expected to pick up, driving an increase in demand for rare earth permanent magnets, and a steady trend in rare earth prices is already emerging. Under the current trend of tightening total mining control, recycling and reuse of rare earth secondary resources such as NdFeB recycling materials is an important complement to rare earth supply and an important way to develop a circular economy in the rare earth industry.
Risk warning
Total rare earth supply control falls short of expectations; risk of uncertainty in rare earth imports; risk of falling rare earth market prices; policy progress falls short of expectations.