China Northern Rare Earth's September listing prices increased - How will rare earth prices perform in the future? [SMM Comment]

China Northern Rare Earth's September listing prices were released on the afternoon of September 2! As many market participants had previously expected, the September listing prices for multiple rare earth products from China Northern Rare Earth rose, with increases of over 4% for Pr-Nd oxide, neodymium oxide, Pr-Nd alloy, and neodymium metal. According to the SMM survey, the high listing prices of China Northern Rare Earth in September are expected to boost market sentiment in the short term. However, the future performance of rare earth prices will still need to be observed in terms of the "peak season effect" in the rare earth industry.

On September 2, China Northern Rare Earth released the listing prices for rare earth products in September 2024, with prices for multiple rare earth products rising MoM. Lanthanum oxide was priced at 4,100 yuan/mt, unchanged from August 2024; cerium oxide was priced at 7,600 yuan/mt, also unchanged from August 2024. Pr-Nd oxide was priced at 403,200 yuan/mt, up 4.78% MoM; neodymium oxide was priced at 411,600 yuan/mt, up 4.68% MoM; Pr-Nd alloy was priced at 500,000 yuan/mt, up 4.6% MoM; neodymium metal was priced at 510,000 yuan/mt, up 4.51% MoM.

Spot market: On the first trading day of September, prices for multiple rare earth products, whether light rare earths or medium-heavy rare earths, increased. The average price of Pr-Nd oxide on September 2 was 415,000 yuan/mt, up 1.72% from the previous trading day; the average price of Pr-Nd alloy on September 2 was 511,000 yuan/mt, up 1.39% from the previous trading day.

Reviewing the market performance of Pr-Nd oxide and Pr-Nd alloy in August, their prices mostly rose with few declines. Especially after August 16, both Pr-Nd oxide and Pr-Nd alloy saw significant increases. Even though there were brief pullbacks due to downstream resistance to high prices, the strong unwillingness of upstream suppliers to sell at low prices led to an overall significant increase. The average price of Pr-Nd oxide on August 30 was 408,000 yuan/mt, compared to 367,000 yuan/mt on July 31, an increase of 41,000 yuan/mt, or 11.17%, in one month. The average price of Pr-Nd alloy on August 30 was 504,000 yuan/mt, compared to 457,500 yuan/mt on July 31, an increase of 46,500 yuan/mt, or 10.16%, in one month.

Future Market

According to SMM, many industry participants had previously expected China Northern Rare Earth's September listing prices to be high, and the actual high listing prices are expected to boost market sentiment in the short term. However, the market had already traded on the expectation of high listing prices, so the future performance of the rare earth market will mainly depend on changes in fundamentals such as supply and demand. According to the SMM survey, as September has just begun, the "peak season effect" of downstream orders in the rare earth industry is somewhat lacking, and end-user demand is still in a slow recovery phase. Downstream magnetic material companies have limited acceptance of high-priced sources. However, the significant reduction in rare earth ore imports and the noticeable narrowing of the increase in the total control indicators for rare earth mining have provided support for rare earth prices on the supply side. Coupled with the optimistic sentiment of most industry participants about the future performance of rare earth prices, the strong willingness of upstream suppliers to hold prices firm and not sell at low prices has made it difficult to find low-priced sources in the spot market.

In summary, SMM expects the future rare earth market to show a stable to strong trend. It is still necessary to observe whether there will be a significant improvement in demand as the peak season progresses, which will then affect the direction of rare earth prices.

Voices from Various Sides

[China Northern Rare Earth: Short-term prices are expected to rise, while medium and long-term market prices may return to a stable range] Additionally, it is worth noting that China Northern Rare Earth mentioned the future market of rare earths in its 2024 semi-annual report: In H1, with the release and implementation of a series of policies such as the State Council's "Action Plan for Promoting Large-scale Equipment Renewal and Consumer Good Trade-in" and the Ministry of Commerce and other departments' "Action Plan for Promoting Consumer Good Trade-in," the consumption in fields such as NEVs, energy-saving appliances, and industrial motors will be strongly promoted, driving the demand for downstream magnetic materials, polishing materials, and hydrogen storage materials in the rare earth industry. The implementation of the "Rare Earth Management Regulations" will standardize the management of rare earth mining, smelting and separation, and sales, optimizing market supply and strengthening industry concentration. Upstream raw material supply is expected to tighten further. Currently, the prices of major rare earth products have returned to relatively low levels, and in the short term, prices are expected to stabilize and rise under the stimulus of favorable policies. In the medium and long term, with the gradual emergence of policy benefits, industry order will be further standardized, and market prices may return to a stable range.

[Galaxy Securities: Rare earth prices are expected to rebound from the bottom] Galaxy Securities pointed out that China's rare earth reserves account for 40% of the global total, making it the main supplier of rare earths globally. The current rare earth industry is at a bottom position, and the significant slowdown in the increase of rare earth ore supply is expected to improve the supply-demand structure of rare earths. The industry integration forming two major rare earth giants in the north and south will further optimize the supply structure of the industry. The formal implementation of the "Rare Earth Management Regulations" will continue to regulate the healthy and orderly development of the industry. Under the support of policies and the recovery of supply and demand fundamentals, rare earth prices are expected to rebound from the bottom, significantly improving the profitability of rare earth companies. It is recommended to pay attention to China Rare Earth, China Northern Rare Earth, Rising Nonferrous Metals, and Shenghe Resources.

[China Securities: The significant slowdown in the growth rate of rare earth mining quotas improves the bottom structure of the sector] According to a report by China Securities on August 25, the second batch of rare earth mining and smelting & separation total control indicators for 2024 was recently announced, including 125,990 mt of light rare earths, 9,010 mt of medium-heavy rare earths, and 127,000 mt of smelting & separation. Thus, the total indicators for the first two batches of 2024 are 250,850 mt of light rare earths, 19,150 mt of medium-heavy rare earths, and 254,000 mt of smelting & separation. The mining quota for medium-heavy rare earths has remained at 19,150 mt in recent years, while the mining quota for light rare earths has only increased by 6.4% YoY compared to 2023, a significant slowdown compared to the 23.2%, 28.2%, and 23.6% growth rates from 2021 to 2023. Recently, rare earth prices have been steadily rising. With the peak season approaching, orders are increasing, and transactions are improving, providing stronger support for prices from both supply and demand sides. Currently, rare earths are at a bottom range, and with the release of the latest rare earth quotas, the industry structure will gradually improve. Pay attention to the bottom-up opportunities in the rare earth magnetic material sector.