The Zhitong Finance App learned that Dongguan Securities released a research report stating that the total control targets for the first batch of rare earths mining, smelting and separation in 2024 were 135,000 tons and 127,000 tons, respectively, distributed to China Rare Earth Group and Northern Rare Earth Group. Under the continuous regulation and rectification of the country, the rare earth industry's development environment continues to be optimized, the industry integration process is accelerated, and product bargaining power is expected to improve. Supply-side countries strictly control mining and smelting indicators. As terminal products move towards high-end manufacturing, green environmental protection, and new energy materials, the prospects for the rare earth and magnetic materials industry continue to be promising. Although there are rumors of abandoning rare earths in some fields, rare earth motors will still be the mainstream of the new energy market due to mature technology and high performance. It is recommended to focus on related companies benefiting from the integration of the rare earth industry and the good development of new energy vehicles and robotics businesses: China Rare Earth (000831.SZ), Northern Rare Earth (600111.SH), Guangsheng Nonferrous (600259.SH), Jinli Permanent Magnet (300748.SZ), and Zhenghai Magnetic Materials (300224.SZ).

The main views of Dongguan Securities are as follows:

Incidents:

On February 6, the Ministry of Industry and Information Technology and the Ministry of Natural Resources issued a notice on the first batch of rare earth mining, smelting and separation total control indicators for 2024. The indicators were distributed to China Rare Earth Group Co., Ltd. and North China Rare Earth (Group) Hi-Tech Co., Ltd.

Comment:

The first batch of rare earth indicators was released in 2024, and the growth rate has slowed somewhat. The total control targets for the first batch of rare earths mining, smelting and separation in 2024 were 135,000 tons and 127,000 tons, respectively, distributed to China Rare Earth Group and Northern Rare Earth Group. Among them, in terms of mining indicators, China Rare Earth Group is 30,280 tons of light rare earths, 10,140 tons of medium heavy ionic rare earths, and 94,580 tons of light rock rare earths of the Northern Rare Earth Group; in terms of smelting and separation indicators, China Rare Earth Group is 38,990 tons and the Northern Rare Earth Group 88,010 tons. Overall, the growth rate of the first batch of rare earth indicators slowed in 2024. The mining index increased by 12.50% year on year, 6.55 percentage points narrower than the growth rate of the first batch of indicators in 2023; the smelting and separation index increased 10.43% year on year, and 7.88 percentage points narrower than the growth rate of the first batch of indicators in 2023. Looking at the breakdown, the total light rare earth index was 124,860 tons, an increase of 14.49% year on year, and the total medium to heavy rare earth index was 10,140 tons, down 7.34% year on year.

Supply on demand, reasonable distribution. China's rare earth indicators are distributed according to the principle of “supply according to demand”. The country strictly controls the rare earth supply side, and continues to deepen supply-side reforms to accelerate the integration of rare earth resources to promote relatively stable product prices and ensure the safety and smooth flow of the supply chain. The 2024 rare earth index continued to grow year on year, reflecting the country's positive attitude towards the development of the rare earth industry. Looking ahead to 2024, in the context of “on-demand supply”, the country will rationally allocate mining and smelting indicators to rare earth groups according to downstream demand. Combined with the actual mining and smelting situation of Chinese rare earth enterprises, it is expected that the overall rare earth distribution index will hardly be greatly improved in the future, and the trend of oversupply in the rare earth industry is expected to ease in 2024.

Continue to monitor the recovery in terminal demand. In January of this year, the Ministry of Industry and Information Technology proposed to focus on advantageous industrial chains such as rare earths, photovoltaics, new energy vehicles, and 5G to forge a number of “killer” technologies. As the new energy properties of rare earths continue to strengthen, it is worth looking forward to an improvement in demand for terminals in the industrial chain. Specifically, the NEV market continues to prosper. As the biggest demand area for rare earths downstream, domestic NEV production and sales continue to underpin demand for rare earths. Since 2023, the robot concept has exploded, and rare earth permanent magnets have risen in tandem as an important material for motors in robots. As domestic and foreign manufacturers accelerate technological changes, domestic policies continue to boost, and the prospects for humanoid robots and industrial robots are optimistic. Driven by the “dual carbon” policy, wind power has developed rapidly. As a key material component for direct drive and semi-direct drive wind turbines, rare earths used in wind power are expected to continue to grow.