SHANGHAI, Jul 13 (SMM) – Shares of rare earth permanent magnet continued to rise last Friday. As of the closing of the day (July 9), shares of China Northern Rare Earth, Shenghe Resources, GEM, Xiamen Tungsten, Guangsheng Nonferrous, Yujing, Huicheng Environmental Protection and Chalcosurged by daily limit. Shares of Dadixiong and Minmetals Rare Earth rose by more than 9%.
On industry news, a video conference on industrial and information system industrial policies and regulations was held in Beijing last week by the Ministry of Industry and Information Technology. Efforts should be made to ensure the safety and stability of the industrial chain and supply chain, and guidance on promoting the orderly transfer of manufacturing should be promptly formulated, accelerating the development of new service-oriented manufacturing models and industrial design. The optimizing of the development off industry enterprises, accelerate the promotion of the legislation of the Telecommunications Law and promote the promulgation of the "Rare Earth Regulations" should be carried out as soon as possible, MIIT said.
China's rare earth not sold at "rare" prices
In January this year, the MIIT issued the "Regulations on Rare Earth Management (Draft for Solicitation of Comments)". The "Draft for Comments" proposed that the state implement total quota management for rare earth mining and rare earth smelting and separation, and implement strategic reserves of rare earth resources and rare earth products. Penalties for companies that violate the regulations are clearly defined for the first time.
MIIT’s Xiao Yaqing said that the Rare Earth Regulations are mainly based on the long-term development strategy and market demand for rare earth, as well as the problems existing in actual development. Xiao pointed out that China's rare earths did not sell at the price of “rare”, but sold at the price of “earth”.
Demand for rare earth has grown rapidly since the beginning of 2021, driven by the rapid development of new energy and photovoltaics amid the carbon neutrality and carbon emission peak policies. Prices of rare earth rose before falling and surged in late June. On July 9, SMM average spot price of neodymium oxide was 525,000 yuan/mt, SMM average spot price of neodymium was 655,000 yuan/mt, and SMM average spot price of praseodymium-neodymium alloy was 665,000 yuan/mt. Prices have increased significantly since July.
As a key industrial basic material, rare earth permanent magnets benefited from the recovery in downstream terminal demand, which drove prices of rare earth to rise sharply. The rare earth permanent magnets sector entered a period of high prosperity. Prices of some domestic light rare earth products have risen recently, and the supply and demand structure is expected to optimise and valuation of rare earth and magnetic materials is are expected to rise. Prices should rise further.
Recently, companies have announced their performance for H1 2021. Net profit attributable to listed shareholders of Hengdian Group DMEGC Magnetics is expected to be at 515.61-584.36 million yuan, an increase of 50-70% from the same period last year. Jinli Permanent Magnet plans to invest in the construction of "3,000 mt of high-end magnetic materials and 100 million sets of modules per year project" through its wholly-owned subsidiary Jinli Ningbo Technology. Investment stands at 1.1 billion yuan.
On the other hand, Nantong Zhenghai High-Performance Rare Earth Permanent Magnet R&D and Production Base, a subsidiary of Zhenghai Magnetics, held a groundbreaking ceremony in Rugao High-tech Industrial Development Zone on June 28. The company proposes to build the Rugaobase into the world's largest R&D and production base for rare earth permanent magnets, and a modern factory with advanced technology, suitable equipment, efficient logistics, automation, intelligence, and environmental friendliness. Jintian Copper plans to invest 600 million yuan in the construction of 8,000 mt high-performance rare earth permanent magnet materials and devices.
As a national strategic resource, rare earth has undergone qualitative changes in the industry after years of rectification, and the industrial order has returned, according to market analysts. Leading domestic rare earth companies can not only increase their market share through the effective growth of rare earth quotas, but also can increase their own production. Higher proportion of self-produced ore or the purchase of low-cost domestic ore will drive scale growth and cost reduction. Eventually, high rare earth prices will increase performance of companies substantially.
With rapid growth of global demand for new energy vehicles, the amount of didymium oxide consumed by global new energy vehicles will reach 30% of the current global supply by 2025. The core species of rare earth didymium oxide will bring great opportunities to the industry. The profit elasticity and growth are determined. Leading rare earth companies have a current valuation of about 20 times, which has a great valuation advantage in the new energy industry chain.