Prices are rising like a rainbow. The week after the festival, the price of rare earth kept rising. Taking praseodymium neodymium oxide, the main variety of light rare earth, as an example, the price has exceeded the million mark. According to the statistics of my nonferrous metals network, the price released at 17:00 on February 11 reached 1.08 million / ton, with a weekly increase of 12%. This is also the historical second highest point of praseodymium and neodymium oxide price, which is not far from the historical high of 1.275 million / ton in 2011.
Why? There is strong demand in emerging fields such as new energy vehicles, wind power, industrial motors and variable frequency air conditioning. Orders of large magnetic material enterprises have increased significantly and are generally full. The supply increment is limited, the contradiction between supply and demand is prominent, and the price rise expectation of the industrial chain is strong, showing that the downstream inventory is not high and the upstream is reluctant to sell. The price rise trend has been formed and is difficult to reverse. According to the statistics of Baichuan Yingfu, on February 11, the inventory of praseodymium and neodymium oxide was 3266 tons, equivalent to two weeks of inventory. The inventory data disclosed by the listed companies of major magnetic materials was also at a low level.
Stable prices are conducive to the sustainable development of the industry, and there is no need to worry about policy pressure. There was a China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) limited price auction of praseodymium and neodymium metal before, and the listing price in recent China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) February was significantly lower than the market price, which can reflect the government’s intention to stabilize rare earth prices and prevent sharp rise and fall. Looking back on history, rare earth prices often rise and fall sharply. After a flash in the pan, they fall into the doldrums and silence, which is not conducive to the upstream enterprises, does not reflect the due value of resources, and is also not conducive to the stable production of downstream enterprises. At present, the rare earth industry is unprecedentedly healthy. Maintaining the stability of rare earth prices is the primary purpose of the government, but it can not be unilaterally understood as suppressing prices! The positioning of rare earth is a national strategic resource and an important tool of the country. It should be sold at the price of rare earth, not the price of soil. Resources enjoy high prices, and it is difficult to change the policy trend of profit distribution upstream and downstream of the industrial chain. The original intention and orientation of the policy has undergone a qualitative change. We believe that the secondary market has not fully priced this point!
How to map to the secondary market? Take China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) as an example, the two quotations in January and July 2021 were caused by the resonance between the rise of rare earth prices and the energy metal market. Since September 2021, the new energy sector has undergone drastic adjustment, and the equity market has significantly passivated the simple price rise of upstream products, especially lithium cobalt rare earth. There are multiple factors such as capital and mood, but we see that the fundamentals of rare earths have not changed, but are getting better and better. Now we look at the sector and find that a new logic and expectation difference is forming, which is expected to become a new catalyst for the next wave of market!
The new logic of rare earth: the pattern of supply and demand stands out from the crowd and is a friend of time. In the next three years, rare earth is the healthiest variety in the upstream supply and demand pattern of new energy. After experiencing the price rise caused by the demand explosion in 2020-2021, the upstream and midstream of the new energy vehicle industry chain have entered the production expansion cycle. Only the supply of rare earth is difficult to effectively improve. From the perspective of resources, the overseas supply (Mount pass in the United States, Lynas in Australia and Myanmar mine) has reached its peak, and it is difficult to see a clear production expansion path at present; In China, the black rare earth disappeared, and the production quotas were all in the two major groups ( China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) and the newly established China rare earth group). From the indicators issued before the festival, the overall growth rate was relatively restrained, with a year-on-year growth rate of 20%. With the passage of time, the healthy supply and demand pattern of rare earth stands out from the rest. Unlike other varieties, it is deteriorating. Time will be a friend of the rare earth sector. This is the new logic of the rare earth sector. The sustainable time of the healthy supply and demand pattern is far beyond market expectations!
The industry leader – China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) has increased both in volume and profit. The first batch of production indicators issued before the festival in 2022, the main increment is China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , and the mining index increment is 16080 tons, accounting for 95.7% of the increment of light rare earths in China. Profits keep rising. The rare earth concentrate mainly comes from brother companies, which is far lower than the market price. Although it has no ore, it enjoys the appreciation of resources. According to the price of 1 million / ton, the profit per ton of praseodymium neodymium oxide is about 480000 yuan (excluding taxes), and the annual profit margin breaks through 10 billion yuan.
Risk warning: the risk of demand exceeding the expected decline; Risks of drastic changes in industrial policies; Risk of epidemic deterioration beyond expectation
