Since the price of neodymium oxide peaked and fell in early 2022, the overall listing price of rare earths in the North has declined or remained flat. It only rebounded in September-October '23; this increase is the first time since November '23, which is of great significance in boosting industry confidence.
The Zhitong Finance App learned that Guojin Securities released a research report saying that recently, the listing price of Northern Rare Earth increased in May 2024. The prices of praseodymium oxide/neodymium oxide/praseodymium metal neodymium/metal neodymium were 39.32/40.15/48.8/498,000 yuan/ton, respectively. Compared with April prices, they were +2.75/+2.75/+3.3/+33,000 yuan/ton, respectively. After a reduction in March 2024 and a flat rate in April, the listing price of praseodymium oxide was +7.5% month-on-month to 393,200 yuan/ton in May. As a leader in light rare earths, the listing price of Northern Rare Earths often has some guiding significance. Overall, since the price of praseodymium oxide peaked in early 2022, the overall listing price of rare earths in the North has declined or remained flat. It only rebounded in September-October '23; this increase is the first time since November '23, which is of great significance in boosting industry confidence.
The main views of Guojin Securities are as follows:
Spot prices bottomed out and rebounded. As of May 6, the spot price of praseodymium oxide was 403,000 yuan/ton, up 16% from the bottom (mid-March); however, the current price is still at a historically low position in the past 5 years.
Weakening imports paid off. As of March 2024, cumulative imports of rare earth ores fell 14% year on year, with US mines and Myanmar mines falling 22% and 16% year on year respectively. Reduced historical inventories combined with low prices have seriously reduced profit margins, and imported mines are expected to continue to weaken; moreover, since Myanmar rare earth mining is scattered and small-scale, and the problem of excessive mining in the early stages is common, and the decline in grade is serious, it is expected that Myanmar's mine supply will continue to weaken in the long run.
Overseas supply disruptions continue. In April, a drone attack occurred in Naypyidaw, Myanmar, and the situation in Kachin State (an important rare earth producing area) was turbulent; judging from the past, the turbulent situation may have an impact on mining and shipping of Myanmar mines (which account for nearly 10% of global supply).
The rate of quota growth is slowing down. The year-on-year growth rate of the first batch of quotas in '24 was only 12.5%, significantly lower than the 20%/19% in the past two years. Looking at the whole year, demand for wind power and new energy vehicles surged in 2020, and the quota growth rate in 21-23 was higher than 20%. Considering the significant decline in the growth rate of the first batch of quotas this year compared to previous years and the previous quota issuance situation, Guojin Securities believes that the quota growth rate is also expected to slow down throughout 2024.
Supporting measures for “equipment renewal” and “trade-in” continue to be implemented, which is expected to contribute to a demand explosion point. On April 26, seven departments jointly issued the “Implementation Rules on Automobile Trade-in Subsidies”, which clarified the scope and standards of the subsidy; previously, the Ministry of Finance and the Ministry of Industry and Information Technology issued the “Notice on Launching Pilot Work for New Manufacturing Technology Transformation Cities”, and seven departments including the Ministry of Industry and Information Technology and the General Administration of Financial Supervision jointly issued the “Implementation Plan to Promote Equipment Upgrades in the Industrial Sector”, clearly proposing to “increase fiscal and tax support” and “strengthen financial support.” As an important magnetic material for industrial equipment motors, electric drives for new energy vehicles and EPS for traditional vehicles, NdFeB is still the optimal solution for energy efficiency and performance, and is expected to fully benefit from “equipment renewal” and “trade-in” activities.
According to estimates by Guojin Securities, the global demand for NdFeB in the industrial manufacturing motor sector in 2026 will be 16,000 tons, and the 3-year CAGR will reach 44%.
Demand for new energy+energy saving continues, and intelligent manufacturing upgrades are underway
As of March 2024, as the main downstream of high-performance NdFeB, the cumulative production of new energy vehicles, air conditioning, and industrial robots was 29.2%, 16.5%, and 4.9%, respectively. As the main drive for new energy vehicles and the core material for inverter air conditioning compressors, NdFeB is expected to fully benefit from the wave of automobile electrification and the production and sales boom of air conditioners; with the continuous upgrading of intelligent manufacturing in China, NdFeB is expected to benefit from an increase in industrial robot production at this stage, and is expected to benefit from the growth of the humanoid robot market in the future.
Investment advice
As the boom in traditional fields such as new energy vehicles and air conditioning continues, “equipment renewal” and “trade-in” are expected to increase demand beyond expectations, and low- and middle-end demand will pick up under economic recovery; supply-side domestic quota growth is slowing down, imported mining continues to weaken, and we continue to be optimistic about a reversal in rare earth prices. The resource side suggests focusing on rare earths from the North (600111.SH), China rare earths (000831.SZ), Shenghe Resources (600392.SH), etc.; magnetic materials suggest focusing on Jinli permanent magnets (300748.SZ) and Zhenghai magnets (300224.SZ).
Risk warning
Rare earth supply exceeded expectations; demand fell short of expectations; rare earth price fluctuations exceeded expectations.