Investment Event: on January 28, the Ministry of industry and information technology issued the notice of the Ministry of industry and information technology and the Ministry of natural resources on Issuing the total control indicators of the first batch of rare earth mining and smelting separation in 2022. The total control indicators of the first batch of rare earth mining and smelting separation in 2022 were 100800 tons and 97200 tons respectively. Among them, the indicators of light rare earth mining, medium and heavy rare earth mining, smelting and separation of China rare earth group are 29100 tons, 7806 tons and 34680 tons respectively; The light rare earth mining and smelting separation indexes of China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) are 60210 tons and 53780 tons respectively; The mining, smelting and separation indexes of medium and heavy rare earths of Guangdong rare earth industry group are 1620 tons and 6362 tons respectively; The medium heavy rare earth mining index and smelting separation index of Xiamen Tungsten Co.Ltd(600549) are 2064 tons and 2378 tons respectively.
There is no increase in the supply of medium and heavy rare earths, and the increase of light rare earths is mainly in China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) . The first batch of rare earth mining, smelting and separation indicators in 2022 increased by 20% compared with the first batch in 2021, of which the light rare earth mining indicators increased by 23% and the medium and heavy rare earth mining indicators remained unchanged. The increment of light rare earth mining is mainly China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , and the mining index of China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) is 36.4% higher than that of last year; The light rare earth mining index of the newly established China rare earth group is 29100 tons, an increase of 2.5% over the sum of the first batch of light rare earth mining indexes of China Minmetals Rare Earth Co.Ltd(000831) , China rare earth and South China rare earth in 2021. The supply concentration of medium and heavy rare earths in the first batch of indicators this year has increased significantly. In 2022, the newly established China rare earth group’s first batch of light rare earths and medium and heavy rare earth mining indicators accounted for 33% and 68% of the total respectively, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) this time’s light rare earth mining indicators accounted for 67% of the total, and Guangdong rare earth industry group and Xiamen Tungsten Co.Ltd(600549) this time’s medium and heavy rare earth mining indicators accounted for 14% and 18% of the total respectively.
With the development of new energy industry, the demand for rare earth continues to be strong, the supply and demand is tight, and the price of light rare earth continues to rise. The first batch of rare earth mining and smelting indicators in 2021 account for about half of the annual indicators. If the first batch of rare earth mining and smelting indicators in 2022 are still half of the annual indicators according to the promulgation rhythm of production quotas in 2021, it is expected that the annual rare earth mining and smelting indicators in 2022 will increase by 20% compared with last year, about 202000 tons, which is consistent with our previous supply and demand forecast. According to our previous calculation, the global supply of rare earth oxide is about 460000 tons in 2022, of which the supply of praseodymium neodymium oxide used to produce rare earth permanent magnet motors, an important part of the new energy industry chain, is about 115000 tons (YoY + 17.6%), while the demand of praseodymium neodymium oxide in 2022 is about 128000 tons (YoY + 12.5%), and the global supply and demand gap is 13000 tons. Stimulated by the tight supply and demand in the industry, the price of rare earth continued to rise from 2021q4 to the beginning of this year. In January 2022, the average price of praseodymium and neodymium oxide reached 914600 yuan / ton, up 108% year-on-year and 7% month on month; The prices of dysprosium oxide and terbium oxide were 29908 and 12781600 yuan / ton respectively, with a year-on-year increase of 41% and 54% respectively, and a month-on-month increase of 2% and 14% respectively. According to SMM research, due to the severe epidemic situation in Myanmar, Myanmar’s imported mines continued to be tight at the beginning of the year. China’s neodymium iron boron waste, which accounts for 38% – 40% of the supply of rare earth upstream oxides, may fall by 20% – 30% in February due to factors such as inverted cost of waste enterprises, difficult to find waste in stock, shutdown and maintenance during the Spring Festival and so on. The tightening of imported ore and Nd-Fe-B waste at the supply end has made the upstream supply of rare earth in China continue to be tense. The demand for medium and high-end Nd-Fe-B in downstream new energy vehicles, wind power generation, two wheeled electric vehicles and other application fields is strong. In 22 years, large magnetic material enterprises have sufficient overseas orders. At present, some magnetic material enterprises have run out of rare earth metal inventory. Superimposed on the expectation of price rise, the purchase and replenishment of the industrial chain in the spring and the demand for building the warehouse after the reorganization of China rare earth group will further enlarge the demand for rare earths and expand the gap between market supply and demand. It is expected that the price of rare earths will still have a strong upward momentum after the Spring Festival.
Investment suggestion: the rapid development of downstream new energy industry drives the continuous strong demand for rare earth. The national policy attaches importance to establishing China’s trump card of rare earth resources, effectively controlling supply and improving industry concentration. It is expected that the price of rare earth is expected to continue to rise steadily under the tight supply and demand situation. Based on the quota of the first batch of rare earth smelting and mining indicators in 2022, it is estimated that the increment of China’s rare earth production in 2022 will be light rare earth, and the increment of light rare earth will mainly focus on China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) . The output growth and the strong price of praseodymium and neodymium oxide are expected to have good release potential this year. It is suggested to pay attention to China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) (600111) and Inner Mongolia Baotou Steel Union Co.Ltd(600010) (600010). China’s quota of medium heavy rare earths has remained unchanged for several consecutive years, showing its scarcity and rarity of resources. It is suggested to pay attention to the only listing platform China Minmetals Rare Earth Co.Ltd(000831) (002738) of China rare earth group, a central enterprise of medium heavy rare earths. In addition, it is suggested to pay attention to other rare earth enterprises Rising Nonferrous Metals Share Co.Ltd(600259) (600259), Shenghe Resources Holding Co.Ltd(600392) (600392), Xiamen Tungsten Co.Ltd(600549) (600549) with the expectation of continued industry integration.
Risk tips: 1) the global economic recovery is less than expected; 2) Downstream demand is lower than expected; 3) The new production capacity of overseas mines was put in faster than expected; 4) China’s quota growth is greater than expected; 5) Rare earth prices fell sharply.
