Shenghe Resources: net profit in 2023 to decrease by 75.53% to 81.17% amid lower price of major rare earth products and the relative weakness of zirconium and titanium prices

The 2023 annual performance forecast released by Shenghe Resources shows: According to preliminary calculations by the financial department, the net profit attributable to the owners of the parent company is expected to be 300 million yuan to 390 million yuan in 2023, down 75.53% to 81.17% compared with the same period last year. It is expected that the net profit attributable to the owners of the parent company after deducting non-recurring gains and losses in 2023 will be 225 million yuan to 315 million yuan, down by 79.80% to 85.57%.

As for the main reason for the pre-reduction in performance for this period, Shenghe Resources said: In 2023, the sales volume of the company's main products increased, but due to the downward oscillation of the market prices of major rare earth products, the market prices of zirconium and titanium products were relatively weak, as well as the imported rare earth concentrates. Affected by factors such as the lag in changes in the cost of raw materials such as imported rare earth concentrates and seaside sand, the average sales price and gross profit margin of the company's main products dropped significantly compared with the same period last year, resulting in a decrease in the company's profits during the reporting period compared with the same period last year.

The decline in rare earth prices in 2023 has put pressure on the performance of many rare earth companies.

While Xiamen Tungsten reported growth in net profit thanks to traditional tungsten and molybdenum industry, it also stated that sales of rare earth oxides, rare earth metals and magnetic materials products have all increased. However, due to falling raw material prices and intensified market competition, product prices fell, and profits decreased.

China Northern Rare Earth (Group) High-Tech Co. expects to achieve a net profit attributable to owners of the parent company to decrease by 61.00% to 63.67% year-on-year in 2023. Regarding the performance reduction. In 2023, affected by the supply and demand relationship in the rare earth industry market, the prices of major rare earth products represented by praseodymium and neodymium products continued to fluctuate downwards since the beginning of the year, and the average price for the year decreased.

Ningbo Yunsheng expects to achieve a net profit attributable to shareholders of listed companies of -220 million to -250 million yuan in 2023, which will be a loss compared with the same period last year. The main reason for the change in performance is that during the reporting period, the prices of the company's main rare earth raw materials continued to fall, resulting in a decrease in the average sales price of the company's finished products of NdFeB permanent magnet materials. Although the company's finished product sales tonnage has maintained growth compared with the same period last year, overall sales revenue is expected to decline. During the reporting period, competition within the industry in the company's main downstream application fields intensified, resulting in a decline in the company's gross profit margin and net profit.

Guangsheng Nonferrous also mentioned that in 2023, the average sales price of major rare earth products represented by praseodymium and neodymium, dysprosium, and terbium products fell sharply year-on-year, and the gross sales profit decreased year-on-year, resulting in a year-on-year decline in the company's profits. It also said that the company has taken multiple measures to promote quality improvement, cost reduction and efficiency improvement, and reduce the impact of adverse factors on the company's operating performance.

In 2023, the annual decline of PrNd oxide was 37.76%, the annual decline of dysprosium oxide was 0.2%, and the annual decline of terbium oxide was 46.95%. According to the import and export, production of rare earth, the supply of rare earths grew in 2023. However, in terms of demand, the number of orders received by downstream magnetic material companies in 2023 was less than expected. Therefore, due to the overall oversupply of rare earth products in 2023, rare earth prices were in a downward trend as a whole in 2023.

Rare earth import increased significantly in 2023. According to data from the General Administration of Customs, China has imported a total of 1,758,52.5 tons of rare earth products throughout 2023, a year-on-year increase of 44.8%. In 2023, the cumulative export of rare earth commodities was 52,306.5 tons, a year-on-year increase of 7.3%.

Output of praseodymium and neodymium saw a slight increase in 2023. For the whole year of 2023, the annual production of PrNd oxide was approximately 72,000 tons, a year-on-year increase of 1.6%.

In 2023, rare earth quotas were issued three times within one year for the first time. On December 15, the Ministry of Industry and Information Technology issued a notice that the total control quotas for the third batch of rare earth mining, smelting and separation in 2023 are 15,000 tons and 13,850 tons respectively. The total quotas for rare earth mining, smelting and separation in 2023 are 255,000 tons and 243,850 tons respectively. In 2023, despite the large import volume of rare earth minerals, the total domestic rare earth mining quotas still increased by 21.43%.

According to SMM research, as the market has entered a "holiday" state recently, market transactions have been very light, and the prices of many rare earth products have entered a stable state. Regarding the performance of the rare earth market in 2024, many industry players hope that with the support of policies, the rare earth market will still have a bright future. On February 1, 2023, the average price of PrNd oxide hit a high point for the year in 2023. Entering February 2024, the market will pay attention to the release of the listing price of Northern Rare Earth in February.