Core view:
Investment Event: on December 22, China Minmetals Rare Earth Co.Ltd(000831) disclosed the progress of strategic restructuring. After being studied by the SASAC and reported to the State Council for approval, it was agreed that Aluminum Corporation Of China Limited(601600) Group Co., Ltd., China Minmetals and Ganzhou Municipal People's government would carry out strategic restructuring of relevant rare earth assets, establish a new company controlled by the SASAC of the State Council and the equity of China rare earth Co., Ltd. held by Chinalco, The equity of China Minmetals Rare Earth Co.Ltd(000831) , China Minmetals Rare Earth Co.Ltd(000831) Group Co., Ltd. held by the affiliated enterprises of China Minmetals Corporation and the equity of China Southern rare earth group Co., Ltd., Jiangxi Ganzhou rare metal Exchange Co., Ltd. and Ganzhou Zhonglan rare earth new material technology Co., Ltd. held by Ganzhou rare earth group Co., Ltd. and its affiliated enterprises are transferred to the new company as a whole. After the reorganization, the actual controller of China Minmetals Rare Earth Co.Ltd(000831) was changed from China Minmetals to the new company.
In the new round of integration, the industry concentration and control have been improved again, and the policy has boosted the heavy weapon rare earth of a large country, which will become China's dominant resource trump card in global competition. This announcement updates the scope and progress of integration subjects. The integration subjects include China Minmetals Rare Earth Co.Ltd(000831) , China rare earth and south rare earth at the upstream resource end, Ganzhou Zhonglan rare earth new materials at the downstream application end, and Jiangxi Ganzhou rare metal exchange, a rare earth spot trading service enterprise. According to the total control indicators of rare earth mining, smelting and separation in 2021, the total rare earth mining and smelting separation indicators of the rare earth assets of Minmetals, Chinalco and Ganzhou government owned by the new rare earth company controlled by SASAC after integration are about 52719 / 47129 tons of REO respectively, accounting for about 31% / 29% of the national total; Among them, the mining index of medium heavy rare earth is 11806 tons of REO, accounting for nearly 62% of the country; The light rare earth mining index is 40871 tons of REO, accounting for nearly 27% of the country. After this integration, the concentration of China's rare earth industry will be greatly improved, and the state's control over the rare earth market will be greatly strengthened. The newly established rare earth company has a more comprehensive industrial chain, including rare earth mining, smelting, product processing, spot trading, etc., and its comprehensive industrial strength is worth looking forward to. China leads the world in rare earth production and smelting technology, and rare earth is also a rare resource variety with global dominance. In the current tense global geopolitical situation and intensified competition for resources among countries, China has successively taken actions such as rare earth legislation and rare earth industry integration, which is conducive to China's strengthening control over the rare earth industry, helping the healthy development of the rare earth industry, making rare earth reflect its real value, and gradually upgrading China's rare earth resource advantage to China's strategic advantage in foreign competition, It is in the best interests of the country.
New energy has given birth to the explosive growth of downstream demand. Under the shortage of supply, rare earth prices are expected to usher in a continuous rising cycle. Under the dual carbon cycle, the rapid development of downstream new energy vehicles, wind power installation, industrial motors and other industries drives the incremental release of rare earth demand. It is expected that the global demand for praseodymium and neodymium oxide will increase from 114000 tons in 2021 to 176000 tons in 2025, with an average annual compound growth rate of 11.5%. The demand explosion led to a continuous decline in the inventory of high-performance magnetic materials and a rapid rise in prices. The ex factory price of praseodymium neodymium oxide rose to 857500 yuan / ton during the year, nearly doubling year-on-year, the highest level in a decade. Corresponding to the shortage of raw materials, it is difficult to increase the supply of overseas mines: in the existing production capacity, Linus, Australia (capacity: 20000-25000t / a), Mount pass, USA (production capacity of 40000 t / a) is close to full capacity and there is no expansion plan. Myanmar's political situation is unstable and years of brutal mining have led to the reduction of high-quality rare earth mineral resources. Although overseas new production capacity has obtained capital investment, it is difficult to provide increment for overseas new rare earth projects in recent two years due to the mine development cycle. China implements total amount control for rare earth mining. From 2019 to 2021, rock and mineral types The mining indexes of (light) rare earth mines increased by 1.2/0.8/28000 tons year-on-year, and increased year by year; the ionic (medium and heavy) rare earth ore indexes were 19150 tons, which did not increase. In the future, the rare earth industry may enter the stage of supply shortage. It is expected that the global praseodymium and neodymium oxide will be in shortage of 1.6/1.3/12000 tons from 2021 to 2023.
Investment suggestion: the new round of national promotion of rare earth industry integration shows that the state attaches great importance to the rare earth industry, which will improve the concentration of China's rare earth industry and control over rare earth prices, so that rare earths reflect their real value. Under the dual carbon cycle, the rapid development of new energy industry drives the incremental release of rare earth demand, and the supply and demand pattern is improving. The rare earth industry may enter a continuous supply shortage pattern, promote the stable upward price, drive the performance release of rare earth stocks and reshape the value. Under the continuous tension of supply and demand in the industry, the price of Rare Earth continues to rise steadily, driving the performance of rare earth companies, while carbon neutralization era new energy opens a broad growth space for rare earth. In line with China's policies, building the rare earth industry into a trump card of China's resources is conducive to the improvement of the valuation of rare earth stocks, and the rare earth industry is expected to usher in the double growth of performance + valuation, It is recommended to pay attention to China Minmetals Rare Earth Co.Ltd(000831) (000831), China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) (600111), Inner Mongolia Baotou Steel Union Co.Ltd(600010) (600010), Rising Nonferrous Metals Share Co.Ltd(600259) (600259).
Risk tips: 1) the production and sales of new energy vehicles and wind power are not as expected; 2) Rare earth prices fell sharply; 3) The new production capacity of overseas mines was put in faster than expected; 4) The integration progress of China's rare earth industry is less than expected.
