SMM News: at present, the price of light rare earths has stabilized, and the rising channel of medium and heavy rare earth prices is expected to continue. Institutional analysis believes that the bottom of rare earth prices fluctuated in 2018 and considered that some companies in 2018 impairment treatment, judging that the plate profitability may gradually pick up in 2019.
Prices continue to rise
Since 2019, the price of praseodymium and neodymium oxide has fallen by 16 per cent from 320000 yuan per ton to 270000 yuan per ton at the end of April. However, because of the high cost support, low prices do not want to ship, downstream businesses temporarily wait and see, do not rush to inquire for orders to receive goods, the actual transaction in the market is not obvious.
At the same time, due to restrictions on imports of rare earths from Myanmar, the price of dysprosium oxide rose from about 1.15 million yuan / ton in November 2018 to 1.49 million yuan / ton now, an increase of about 30 per cent, and prices rose slightly in April.
Market participants believe that although the current pattern of rare earths is divided, the prices of heavy rare earths continue to rise, and the prices of light rare earths have gone down somewhat, Anhui has recently jointly issued a special action document for cracking down on rare earths, and the supply side has not been loosened. At the same time, with the completion of real estate area repair brought home appliances air conditioning and new energy vehicles and other demand expanded, downstream demand will be boosted, conducive to the future trend of rare earth prices.
By the market bullish heavy rare earth prices continue to rise, rare earth plate target has increased greatly. According to Wind Terminal, the rare earth index has risen 26.01 per cent so far this year. Guangsheng Nonferrous and Minmetals rare Earths have increased by 57.83% and 41.34% respectively since the beginning of the year. Recently, the market continued to adjust, and the rare earth index did not retreat, rising 7.94% over the past week, showing a good upward trend.
Performance reversal value revaluation
In the near future, the import of rare earths from Tengchong Customs may be blocked again, and the risk of import may continue near the end of the five-month transition period. This has been the key to the accelerated rise in the price of medium and heavy rare earths since March.
On the supply side, the increase in production worldwide is limited due to the climbing production of the two major overseas suppliers, LYNAS and Mountainpass, in 2018, but mainly light rare earth varieties. Short-term imports of raw materials may be tense, medium and heavy rare earth prices are expected to continue to rise channel.
On the demand side, about 50% of the demand downstream of rare earths comes from magnetic materials. In 2018, the main magnetic materials enterprises showed a significant decline in gross profit margin, some of the small and medium-sized production capacity was cleared, and the market concentration was further improved. Tesla Shanghai Super Factory, which is scheduled to go into production at the end of the year, is expected to produce 500000 pure electric vehicles a year, and the market is expected to cut prices sharply, which is expected to drive sales of new energy vehicles and boost demand for motor and magnetic materials.
Galaxy Securities believes that the expected contraction of the supply of dysprosium oxide and terbium oxide, a representative product of medium and heavy rare earths, will drive a strong rise in prices, which will lead to a reversal of profitability and higher inventory value expectations of rare earth companies, and trigger a revaluation of rare earth companies in the market.
Tianfeng Securities stressed that the bottom of rare earth prices fluctuated in 2018 and considered that some companies will carry out impairment treatment in 2018, judging that the profitability of the plate may gradually pick up in 2019. Although the current average valuation of rare earth companies is high, judging from the rise in the historical plate, the average valuation is expected to return to 23 times and below if the price of rare earths is estimated to rise by more than 50%.