Downstream demand continues to grow + supply side continues to be strictly controlled + national policy support = rare earth prices may make progress while maintaining stability.
Market review: Rare Earth concept sector and rare earth permanent magnet sector fell during the month. On February 15, the wind rare earth index closed at 2167.33, with a weekly increase of 2.56% and a monthly increase of – 4.62%; Wind rare earth permanent magnet index closed at 5161.64, up 2.74% in the week and – 3.37% in the month. The CSI 300 closed at 4600.1, with a weekly increase of – 0.19% and a monthly increase of – 2.68%.
Price: the prices of heavy rare earths and light rare earths increased. According to the data of China Rare Earth Industry Association, from February 1 to February 15, the lowest price of dysprosium oxide in the main heavy rare earth products was 3.12 million yuan / ton, with a two-week rise and fall of 3.65%; Among light rare earth oxides, the lowest trading price of praseodymium and neodymium oxide was 1.085 million yuan / ton, with a two-week rise and fall of 14.45%; The lowest trading price of praseodymium oxide was 1.071 million yuan / ton, up or down 14.42% in two weeks; The lowest trading price of neodymium oxide was 1.19 million yuan / ton, up or down 13.55% in two weeks.
Supply and demand: the operating rate, output and sales volume of praseodymium and neodymium oxide manufacturers decreased month on month in December 2021. According to the data of Asian metal network data center, the operating rate of Chinese praseodymium and neodymium oxide manufacturers in December was 51.39%, down 1.02% month on month and 17.29% year-on-year; The output was 2643 tons, a year-on-year decrease of 14.69% and a month on month decrease of 0.38%; The stock of manufacturer’s warehouse was 6010 metric tons, with a month on month increase of 0.67% and a year-on-year increase of 8.39%. According to provinces, the operating rate of praseodymium and neodymium oxide manufacturers in Inner Mongolia remained unchanged at 60.15% month on month, and the output remained unchanged at 995 tons month on month; The operating rate of Sichuan praseodymium and neodymium oxide manufacturers remained unchanged at 57.09% month on month, and the output was 490 tons; The operating rate of Jiangxi manufacturers decreased to 33.17% month on month.
Import and export: in December 2021, the import volume of rare earth ore increased, and the price of overseas rare earth ore fluctuated significantly. According to the data of the General Administration of customs, the import volume of mixed rare earth carbonate in December 2021 was 61.76 tons, a year-on-year decrease of 88.57%, the average unit price was 99100 yuan / ton, and the price increased by 519.33% year-on-year; The import volume of rare earth metal ore was 4173.00 tons, a year-on-year decrease of 44.14%, the average unit price was 34400 yuan / ton, and the price increased by 142.05% year-on-year; The import volume of thorium ore and its concentrate was 10411.43 tons, a year-on-year increase of 509.80%, the average unit price was 11400 yuan / ton, and the price decreased by 47.31% year-on-year; In December, a total of 14646.19 tons of rare earth ore were imported, with a year-on-year increase of 50.70%. The average price was 48200 yuan / ton, with a month-on-month increase of 64.43%.
Investment logic: the mismatch between supply and demand supports prices, and the rare earth industry chain welcomes the good opportunity of layout. The core reason for the recent strong rare earth price is the mismatch between supply and demand. On the supply side: Although the production index of rare earth in the first half of the year announced before the festival is generally in line with expectations, it is at the lower limit of expectations. At the same time, under the severe epidemic situation in Myanmar, the supply disturbance of rare earth imported ore may continue; Demand side: driven by the high-speed demand for new energy vehicles, wind power and industrial motors, the magnetic material factory has full orders, and the rare earth price is stable and high supported by the strong supply and demand fundamentals. According to frost Sullivan’s prediction (quoted from Jl Mag Rare-Earth Co.Ltd(300748) prospectus), the output of rare earth permanent magnet materials in China and the world will reach 284000 tons and 310000 tons respectively in 2025. It is expected that the increase of global high-performance NdFeB supply may be mainly concentrated in China in the future. With the rapid growth of downstream demand for new energy vehicles, industrial motors and wind power generation, rare earth prices may operate at a high level, the industrial structure continues to be optimized, and the concentration of rare earth permanent magnet industry may be further improved. Re emphasize the core logic of this round of rare earth sector bull: 1) reasonable and abundant liquidity; 2) Driven by downstream demand such as new energy and industrial motors; 3) Price rise Pro cyclical allocation strategy; 4) National policy support. 2021 is the profit inflection point of the whole rare earth industry chain. It is expected that in 2022, the price of rare earth is expected to continue to be strongly supported by the fundamentals of supply and demand, and the profit of the industry chain may continue to exceed expectations when the volume and price rise together. At the current time, we continue to firmly recommend the strategic allocation value of the whole rare earth industry chain.
Risk factors: the impact of the epidemic continues to expand; Macroeconomic fluctuations; The implementation of various policies such as crackdown on Mafia, environmental protection and collection and storage is less than expected; Downstream consumption demand is lower than expected; National policy support was less than expected.
Investment suggestion: maintain the rating of “stronger than the market” in the industry. Taking advantage of the “double carbon” Dongfeng, the demand for high-performance Nd-Fe-B is expected to grow rapidly, the supply side will continue to strengthen control, and continue to recommend strategic allocation opportunities for the whole rare earth industry chain, focusing on: China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , Ningbo Yunsheng Co.Ltd(600366) , Xiamen Tungsten Co.Ltd(600549) , Shenghe Resources Holding Co.Ltd(600392) , Rising Nonferrous Metals Share Co.Ltd(600259) , Inner Mongolia Baotou Steel Union Co.Ltd(600010) , Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) , Yantai Zhenghai Magnetic Material Co.Ltd(300224) , Chengdu Galaxy Magnets Co.Ltd(300127) , Jiangsu Huahong Technology Co.Ltd(002645) , Earth-Panda Advanced Magnetic Material Co.Ltd(688077) , Innuovo Technology Co.Ltd(000795) .
