SHANGHAI, Aug 2 (SMM) - Amid the recent strong upward trend of rare earth prices, demand from new energy vehicles (NEVs) and other emerging downstream sectors surge, while tight control over upstream supply side may continue, thus creating the historical pivot for rare earth industry. The supply & demand and national policies are expected to walk in step with each other, opening the door to long-term bullish market. As a result, the classic Davis double play may appear among the performance and valuation of rare earth board.
Since July, the major rare earth products saw great increase in prices, and praseodymium oxide, terbium oxide, dysprosium oxide rose about 24%, 23%, 11%, respectively. What’s more, the downstream market experienced a high off-season. Specifically, NEVs and other downstream demand was strong with widespread pre-restocking, supply in Myanmar was disrupted ahead the rainy season and worsened COVID, some smelters and separation companies reduced or suspended production in face of national environmental protection requirements. Therefore, the fundamentals of supply & demand offered strong support for rare earth prices.
According to China Association of Automobile Manufacturers (CAAM), the production and sales of NEVs reached 248,000/256,000 units respectively in June, representing a year-on-year growth of about 1.3/1.4 times. Production and sales from January to June reached 1.125/1.206 million units respectively, representing a year-on-year growth of about 2 times. The NdFeB volume used by a single NEV is about 3-5kg, which is 3-5 times that of traditional vehicles. Assuming that the output of NEVs reaches 18 million units by 2025, the corresponding NdFeB demand will reach 54,000-90,000 mt, and the average annual growth rate of NdFeB demand in NEV industry will be about 40% from 2021 to 2025. Thus, NEVs may become the largest major downstream application of rare earths by 2025.
On national policies, Wang Jiangping, Vice Minister of Industry and Information Technology, said in July that the Rare Earth Management Regulations shall be introduced as soon as possible. The Regulations aim at regulating the high-quality development of the rare earth industry, and has prioritized the industry’s development to an unprecedented strategic level. The import and export management will also be included in the Regulations, and enhanced administration of the entire rare earth industry chain could also be expected, including the strategic reserve system, the gross amount indicators, and the punishment for non-compliant enterprises.
