According to Zhitong Finance APP, GTJA has released a research report stating that in recent years, Myanmar's rare earth production has grown rapidly, becoming China's largest source of imports. However, due to political turmoil and the risk of over-extraction of resources, supply may become considerably constrained. On the demand side, domestic "two new" policies have strengthened the terminal prosperity cycle, and rare earth prices are expected to rise steadily, with the second phase reversal of the rare earth sector gradually opening. Recommended symbols: Jl Mag Rare-Earth (300748.SZ,06680), CHINA RAREEARTH (000831.SZ,00769), Rising Nonferrous Metals Share (600259.SH), China Northern Rare Earth (600111.SH). Beneficial symbols: Yantai Zhenghai Magnetic Material (300224.SZ), Ningbo Yunsheng (600366.SH).

The main points of GTJA are as follows:

In recent years, Myanmar's rare earth production has grown rapidly, but the risk of over-extraction of resources has significantly increased, and the development prospects are not optimistic.

Myanmar's rare earth resources have great potential and production growth is rapid. In 2023, Myanmar has become the third largest rare earth producer globally (with a production share of 11%) and China's largest source of imports (accounting for 45% of China's rare earth mineral imports). By 2024, China’s imports of heavy rare earth minerals from Myanmar have reached 0.032 million tons, which is 1.6 times the domestic quota for heavy rare earth minerals, indicating that Myanmar's rare earth supply is particularly important for domestic heavy rare earth minerals. However, due to political instability, tighter rare earth mining policies, and inadequate infrastructure, the development environment for rare earth resources is not optimistic. After experiencing rapid production growth from 2018 to 2023, Myanmar's rare earth mining has been significantly disturbed by over-extraction, warfare, and other disruptive factors, making it quite difficult for subsequent production increases.

The current closure of Myanmar has not ended, and the rare earth supply from Myanmar may be below expectations in 2025.

From October to December 2024, Myanmar's internal conflict led to a closure, causing the amount of rare earth imported from Myanmar to plummet to around 300 tons in December. Although clearance has resumed since December, the negotiation difficulties regarding the interests of miners and the local government have increased, and the import volume from Myanmar has still not recovered. If the disruption lasts longer, by 2025, imports from Myanmar may not meet expectations for domestic rare earth mineral supply. According to our estimates, under a neutral expectation, China's imports of rare earth minerals from Myanmar in 2025 will be approximately 0.024 million tons, down 42% and 30% from 2023/2024 respectively, which is expected to create a strong supply constraint.

The rare earth "cockroach" is difficult to produce in large quantities, combined with the "two new" policies strengthening the terminal prosperity cycle, aiding the second phase reversal of the rare earth magnetic materials Sector.

GTJA believes that the rare earth reversal cycle has gradually begun, and rare earth prices are expected to steadily rise as supply and demand improve. On the demand side, since 2024, domestic 'two new' policies have reinforced the terminal prosperity cycle, estimating that by 2025, the demand for rare earth magnetic materials from domestic new energy vehicles and air conditioners is expected to maintain growth rates of 33% and 7% respectively, with praseodymium and neodymium oxide remaining in a tight balance. On the supply side, if Myanmar's rare earth supply falls short of expectations in 2025, the price increase elasticity will be significantly amplified.

Reviewing the performance of the rare earth sector from 2020 to 2021, during the first phase, stock prices led the rebound in rare earth commodity prices. Since the second half of 2024, the first phase of the reversal in rare earth sector stock prices has basically been completed, and the subsequent sector performance is expected to steadily improve alongside the rise in rare earth prices, favoring leading rare earth/magnetic materials symbols that have clear volume increase logic and can contribute excess profits.

Risk Warning: Overseas supply may exceed expectations, and downstream demand growth may fall short of expectations.