China rareearth stated at the performance briefing on October 30 that as a strategic small metal, rare earth product prices have been fluctuating due to supply and demand dynamics. In 2024, influenced by market conditions, industry supply and demand cycles, among other factors, the prices of major rare earth products showed a rapid downward trend in the first quarter, with fluctuations at relatively low levels in the second and third quarters. As we enter the fourth quarter, some rare earth product prices have shown signs of recovery. With the formal implementation of the "Rare Earth Management Regulations" and improvements in the supply and demand landscape, prices of major rare earth products are expected to return to a relatively reasonable range.

Since 2023, the integration of the domestic rare earth industry has accelerated. Currently, the combined mining indicators of China Rareearth Group and China Northern Rare Earth account for 100% of the total, significantly optimizing the supply pattern.

Looking at the domestic rare earth quotas, the total quota for the first and second batches of mineral products in 2024 is 270,000 tons, a year-on-year increase of 5.9%, a 16 percentage point decrease compared to 2023. The growth rate of domestic quota supply has slowed significantly, reflecting obvious effectiveness in domestic supply integration.

Overseas, according to statistics from China International Capital Corporation, the number of rare earth mines under construction overseas is large, but progress is slow. It is expected that the actual increment in the next 2-3 years will still be limited.

Rare earth prices accelerated their decline in 2022. However, starting from H2 of 2023, both supply and demand pressures have been significantly reflected, and rare earth prices are gradually stabilizing.

Starting from Q2 of 2024, due to the slowdown in the growth rate of the first and second batches of rare earth quotas, combined with the strong willingness of manufacturers to support prices after a significant decline, the supply is tightening.

On the demand side, the continuous destocking of downstream manufacturers in the early stage, coupled with the peak season for electric vehicles/wind power in September and October, has driven marginal demand recovery.

On the overseas front, as the US presidential election approaches, the expectation of increased tariffs after the election may rise. If overseas rare earth and magnetic materials are stocked up ahead of schedule in Q4 2024, it will help boost marginal improvement in rare earth demand.

Overall, both supply and demand are marginally improving, and the price recovery is expected to continue.

Rare earth concept-related Hong Kong stocks:

JL Mag Rare-Earth (06680): JL Mag Rare-Earth stated at the performance briefing that currently, the rare earth prices are still at the bottom of a large cycle compared to the past. The company, as a leading supplier of high-performance rare earth permanent magnetic materials in the new energy and energy-saving and environmentally friendly fields, maintains relatively stable rare earth price fluctuations, which is beneficial for the development of the rare earth permanent magnet material industry and also for the company's operation performance. Based on the company's core values of "customer-oriented, value co-creation," the company has always insisted on integrity and commitment to ensure customer delivery. To this end, the company has established a sound rare earth raw material procurement mechanism to hedge risks. In the future, the company will closely monitor the trend of rare earth raw material prices and flexibly adjust inventory and procurement strategies with caution.