Key investment points
Event: the Ministry of industry and information technology and the Ministry of natural resources issued the first batch of Rare Earth total amount index control plan in 2022. Rare earth is the product of total production control and management implemented by the state. No unit or individual shall produce without and beyond the index. The total amount control indexes of the first batch of rare earth mining, smelting and separation in 2022 are 100800 tons and 97200 tons respectively.
In terms of total amount, rare earth indicators have increased in an orderly manner, and the tightening pattern of supply and demand remains unchanged. This index control plan continues the previous policy ideas. In 2022, the first batch of indicators increased by 16800 tons of REO (YoY + 20%) year-on-year, of which all the increments were light rare earth indicators, and the medium and heavy rare earth indicators did not increase. If the indicators of China's rare earths in the second half of the year are the same as those in the first half of the year (generally the same as those in the first and second half of the year according to historical experience), and considering that the supply of overseas minerals has peaked, we can clearly see that in order to match the demand, China's rare earths have increased orderly, while the overall tightening pattern of global rare earth supply and demand may not change (Figure 4).
Structurally, the indicators are more inclined to China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) . China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) still accounts for almost all incremental indicators, with a year-on-year increase of about 16100 tons of REO (YoY + 36%), accounting for 96% of the new indicators, which is consistent with the distribution trend of indicators in the second half of 21 years, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) accounts for 53% → 60%. Considering the resource endowment, production capacity, environmental protection and other factors, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) may become the main supply growth source of rare earth in the next 3-5 years, and the growth of rare earth leaders is still not fully recognized by the market.
Continue to reiterate: rare earth leaders are expected to grow from cycle to cycle. The market still regards rare earth leaders as cyclical stocks, and is worried about the sustainability of high rare earth prices. We believe that the reason why the cycle is called the cycle lies in the periodic fluctuation of demand and supply, while rare earth is "high demand and limited supply" - on the supply side, China rare earth group was established to continue to implement the total amount index control, and the supply of overseas mines peaked in the medium and long cycle; The downstream transmission of the demand side is smooth, the downstream consumption of new energy vehicles, industrial motors, wind power and so on has erupted, and the supply and demand pattern of rare earth resources has undergone qualitative changes. The price is expected to realize weak periodic fluctuations and truly return to the "rare" value, while the leader of the rare earth industry chain will usher in the "simultaneous rise of volume and price" and continue to benefit.
Core target: 1) upstream resource end, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , Inner Mongolia Baotou Steel Union Co.Ltd(600010) , Shenghe Resources Holding Co.Ltd(600392) ; 2) Midstream magnetic material end, Jl Mag Rare-Earth Co.Ltd(300748) , Yantai Zhenghai Magnetic Material Co.Ltd(300224) , Earth-Panda Advanced Magnetic Material Co.Ltd(688077) , Ningbo Yunsheng Co.Ltd(600366) , Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) , etc.
Risk warning: the risk of new energy vehicle sales falling short of expectations, the risk of industrial policy fluctuations, the risk of industry supply and demand measurement based on certain assumptions, the risk of falling short of expectations, the risk of information lag or untimely update of the public data used in the research report, etc
