Event:
On March 3, 2022, the rare earth office of the Ministry of industry and information technology interviewed China rare earth group, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) group, Shenghe Resources Holding Co.Ltd(600392) company and other key rare earth enterprises. The meeting required that relevant enterprises should earnestly enhance their awareness of the overall situation and responsibility, correctly grasp the current and long-term, upstream and downstream relations, and ensure the safety and stability of the industrial chain and supply chain; We should strengthen industry self-discipline, further standardize the production and operation, product trading and trade circulation of enterprises, and shall not participate in market speculation and hoarding; We should give full play to the leading role of demonstration, promote and improve the pricing mechanism of rare earth products, jointly guide product prices to return to rationality, and promote the sustainable and healthy development of rare earth industry.
Comments:
The situation of short supply continues, and the price of rare earth remains high. As the supply of rare earth is strictly controlled by the state, the demand for downstream new energy vehicles, permanent magnet motors and wind power continues to be strong, and the situation of short supply continues to promote the rapid rise of the prices of various rare earth products. At present, the prices of various rare earth products are the highest in recent ten years, approaching the historical peak in 2011. As of March 4, the rare earth price index reached 429.43 points, and the average price of praseodymium and neodymium oxide closed at 1103 yuan / kg. Before the Spring Festival, due to the high price of rare earth raw material products, the purchasing sentiment of downstream magnetic material manufacturers was weakened, and the downstream purchase rigid orders soared after the festival, increasing the demand for rare earth raw materials. Due to the strong demand in the downstream and the strict control of rare earth indicators by the supply side countries, the overall price of rare earth is easy to rise but difficult to fall.
National policies escort the rare earth industry. Rare earth is a non renewable resource and a strategic resource in China. During the 14th Five Year Plan period, the rare earth industry will continue to develop around the goal of “double carbon”. In recent years, the state has issued a number of policies to help the high-quality development of the rare earth industry. On January 15, 2021, the Ministry of industry and information technology publicly solicited opinions on the regulations on the administration of rare earth (Draft for comments), and proposed that the state implement the total amount index management for rare earth mining and smelting separation. On March 26, the Ministry of natural resources informed that it was necessary to strengthen the supervision and protection of rare earth and other important strategic minerals. On December 21, the Ministry of industry and information technology and other three departments jointly issued the “14th five year plan” for the development of raw material industry, which proposed to strengthen and expand rare earth enterprise groups and encourage rare metal enterprises to accelerate integration. At present, some rare earth prices are still rising at an accelerated pace. In order to promote the healthy development of the industry, the rare earth office interviewed China’s key rare earth companies, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , Shenghe Resources Holding Co.Ltd(600392) and other rare earth companies on March 3, requiring to maintain the upstream and downstream relationship of the rare earth industry chain, not maliciously hype prices, promote and improve the pricing mechanism of rare earth products, and jointly promote the high-quality development of the industry. It is expected that the regulations on rare earth management will be officially implemented in 2022. Under the continuous promotion of national policies, rare earth enterprises will orderly develop and utilize rare earth resources, make the price of rare earth products return to rationality, and jointly promote the high-quality development of rare earth industry.
Investment strategy: at present, the price of rare earth represented by praseodymium and neodymium oxide has risen to the highest in recent 10 years. In the short term, the state will work with key rare earth enterprises to promote the return of rare earth prices to rationality, and the rapid upward trend of rare earth prices may be alleviated. It is expected that the regulations on the administration of rare earth will be officially implemented in 2022. In the long run, national policies will escort the high-quality development of the rare earth industry, accelerate the integration of supply side resources, and superimpose the continuous growth of downstream demand for new energy vehicles and industrial motors. The sustainability and stability of the future development of the rare earth industry are strong, and the upstream and downstream of the industrial chain is expected to develop continuously and healthily.
Risk tips: the demand for downstream rare earth functional materials is lower than expected, the demand of battery manufacturers is weakened, the competition of rare earth mines is intensified, policy changes, macroeconomic downturn and other risks.
