According to the Financial APP, gtja released research reports stating that stock prices have fully reacted to the drop in rare earth prices, and the core company's performance is expected to improve with the stabilization and recovery of rare earth prices, with strong recovery momentum in the rare earth sector. Starting from Q2 of 2024, due to the slowdown in the growth of the first and second batches of rare earth quotas, coupled with the strong willingness of manufacturers to support prices after a significant previous drop, the supply margin tightened. On the demand side, downstream manufacturers continued to destock in the early stage, and the concentrated purchases of electric vehicles/wind power during the peak seasons of September and October promoted marginal demand recovery. Overseas, as the U.S. election approaches, if there is an expectation of increased tariffs after the election, and if overseas rare earth and magnetic materials are replenished ahead of schedule in Q4 of 2024, it will help improve the marginal demand for rare earth. Overall, the improvement in supply and demand is expected to continue, leading to a price recovery.

GTJA's main opinions include:

Rare Earth Supply: Slow integration domestically and gradual increase in overseas supply, strengthening supply flexibility. Since 2023, the integration of the domestic rare earth industry has accelerated, with China Rare Earth Group and China Northern Rare Earth accounting for 100% of the total extraction indicators, significantly optimizing the supply pattern. Based on domestic rare earth quotas, the total allocation for the first and second batches of mineral products in 2024 is 270,000 tons, a year-on-year increase of 5.9%, a decrease of 16 percentage points compared to 2023, indicating a significant slowdown in the growth of domestic quota supply, reflecting the significant effectiveness of domestic supply integration. Overseas, according to statistics from the bank, the number of rare earth mines under construction overseas is large but progress is slow. It is expected that the actual increase in supply will still be limited in the next 2-3 years.

New and old powers resonate, and the mismatch in the rare earth industry marks the beginning of a reversal. The market previously expected that as the growth rate of core demand for new energy vehicles and wind power slowed down in the future, the rare earth market faced the pressure of slowing demand growth. However, the bank expects that the increase in the consumption of magnetic materials per electric vehicle and the warming demand for wind power still have the potential to support the basic demand growth, and the equipment renewal demand set to begin in 2024 is expected to become a new driving force for rare earth demand. On the supply side, the orderly domestic supply pattern has been established, overseas planned increments are many but actual releases are slow, and the supply constraint continues. According to the bank's calculations, the demand growth rate for global high-performance neodymium iron boron from 2024 to 2026 is expected to reach 18%, 18%, and 16%, while the comprehensive calculation of the demand growth rate for global praseodymium neodymium oxide in 2024-2026 will remain around 10% due to demand in medium- and low-performance sectors and other areas. In addition, the long-term increment brought by humanoid siasun robot&automation also has the potential to boost valuation.

In the short term, internal and external improvements in supply and demand, rare earth prices are expected to continue to recover. Rare earth prices accelerated their decline in 2022. However, starting from H2 of 2023, the pressure factors of supply and demand have been significantly reflected, and rare earth prices have gradually stabilized. Starting from Q2 of 2024, due to the slowdown in the growth of the first and second batches of rare earth quotas, coupled with the strong willingness of manufacturers to support prices after a significant previous drop, the supply margin tightened. On the demand side, downstream manufacturers continued to destock in the early stage, and the concentrated purchases of electric vehicles/wind power during the peak seasons of September and October promoted marginal demand recovery. Overseas, as the U.S. election approaches, if there is an expectation of increased tariffs after the election, and if overseas rare earth and magnetic materials are replenished ahead of schedule in Q4 of 2024, it will help improve the marginal demand for rare earth. Overall, the improvement in supply and demand is expected to continue, leading to a price recovery.

Risk Warning: Significant decline in downstream rare earth demand, unexpected release of overseas rare earth mines supply.