The price of praseodymium and neodymium oxide in northern China has reached a 10-year high and still has a rising basis in the fourth quarter.

Northern rare Earth (600111.SH) today updated the listing prices of its light rare earth oxides, raising the prices of related products across the board. It is worth noting that since the beginning of October, the domestic production price of rare earths has been rising all the way. The price of praseodymium-neodymium oxide has soared nearly 25% in a month since October 3. On November 4, the spot price of praseodymium-neodymium oxide industry was 750000 yuan / ton, which is the highest level since November 2011. A reporter from the Financial Associated Press found that although rising prices have brought obvious cost pressure downstream, prices of rare earths are expected to remain strong in the fourth quarter due to strong demand and tight supply for new energy vehicles, wind energy, and industrial motors. The downstream industry has correspondingly reduced the use of rare earths, and future demand-side changes remain to be seen.

The two-way effect of supply and demand leads to price increase.

According to the price data released by northern rare earths today, lanthanum oxide is listed at 10800 yuan / ton; cerium oxide is listed at 10800 yuan / ton; neodymium oxide is listed at 791900 yuan / ton, an increase of 142800 yuan / ton; metal praseodymium and neodymium is listed at 930000 yuan / ton, adjusted to 167000 yuan / ton; metal neodymium is listed at 965000 yuan / ton, an increase of 171000 yuan / ton. The price of praseodymium and neodymium oxide soared to 762600 yuan per ton, an increase of 139400 yuan per ton.

Analysts at Cinda Securities said that from August to September this year, the price of praseodymium and neodymium was as high as 700000 yuan / ton to 750000 yuan / ton, restraining some middle and low-end NdFeB consumption, but high-end products accelerated penetration in the new energy automobile industry. At the same time, driven by power shortage and energy efficiency dual control, industrial motors are rapidly transformed to NdFeB motors. Although the overall output of low-end NdFeB has declined, the increase in the proportion of high-end NdFeB has also supported the growth of total demand for rare earths.

According to the analysis of the industry, the price increase is caused by the two-pronged effect of supply and demand, but the role of the supply side is more obvious. The fourth quarter is the traditional peak season for downstream demand for rare earths, and supply and demand fundamentals are expected to support rare earth prices.

From the point of view of the supply side, foreign raw ore can not be imported for a long time, resulting in a shortage of raw materials and a serious shortage of production capacity. Australia's Lynas supply, which accounts for 10 per cent of global light rare earth production, has tightened, with praseodymium-neodymium oxide production of 1255 tonnes in the third quarter, down 10 per cent from the previous quarter and 6 per cent from Myanmar's exports shrank due to the epidemic and political instability. Myanmar's imports of rare earth oxides were not listed as 73 tons in September, an increase of 5% month-on-month and a sharp drop of 95% from a year earlier.

On the demand side, according to relevant data, chips grew by about 10 per cent in October from September, and retail sales of narrow passenger cars in October are expected to be 1.72 million, up 8.8 per cent from September. In addition, among the 1.24 million year-on-year increments from January to October this year, new energy vehicles contributed an increase of 1.57 million, accounting for 126% of the total increase, indicating that new energy vehicles are becoming the main driving force in the increase in automobile sales. As the use of rare earths per bike of new energy vehicles is 3-5 times that of traditional cars, the rapid growth of new energy vehicles will greatly boost the demand for rare earths. With the easing of power cuts in the fourth quarter and the effect of peak season, the demand is expected to grow further, driving up prices.

Analysts at Soochow Research Institute believe that in addition to the booming demand for electric vehicles, wind power and industrial motors have provided a new increase in demand for rare earths, which is one of the reasons for the recent price rise, and this part of the demand is good sustainability. The demand for wind power is higher than expected, and due to the fact that the installation of wind power is expected to exceed expectations and the large-scale wind turbines help to access the Internet at an affordable price, it is predicted that the compound growth rate of new wind power installations in China will be 20% from 2021 to 2025; and with the gradual increase in the permeability of permanent magnet direct drive motors in wind turbines, it is estimated that the demand for NdFeB in wind power will reach 27000 tons in 2025, and the compound growth rate will reach 34% from 2021 to 2025. Industrial motors may be the biggest expected difference, and the growth space is expected to exceed that of new energy vehicles and wind power. Under the background of double control of energy consumption and high electricity price, with strong energy-saving economy, the permeability of rare earth permanent magnet motors can increase from 3% in 2020 to 25% in 2025. With the steady growth of the total output of industrial motors in China, the demand for NdFeB for industrial motors is expected to reach 62000 tons in 2025 and 56% CAGR in 5 years.

According to import and export data, China's rare earth exports in October were 4330.4 tons, an increase of 89.27 percent over the same period last year. Rare earth exports remained at a high level this year, with a cumulative export volume of 39967.7 tons from January to October this year, an increase of 39.4 percent over the same period last year. The rapid growth of imports and exports proves the high demand for rare earths.

The continuous rise in the price of rare earths objectively leads to the pressure of downstream customers.

According to the Financial Associated Press, there are currently four listed A-share rare earth separation and processing enterprises, namely Shenghe Resources, Minmetals rare Earths, Northern rare Earths and Guangsheng Nonferrous. In the first three quarters of 2021, the four major rare earth listed companies achieved a total operating income of 45.035 billion yuan and a total net profit of about 4.304 billion yuan. Among them, the net profit of Shenghe Resources increased by 174.92% compared with the same period last year, Minmetals rare earths increased by 216.39%, northern rare earths increased by 485.26%, and Guangsheng Nonferrous increased by 305.64%. For the big increase in net profit, the four major companies in the upper reaches of the industrial chain said that the market continued to improve, sales prices and sales volume continued to increase.

It is worth noting that the net profit of Zhongke Sanhuan, the world's largest manufacturer of rare earth permanent magnet materials, has been declining for four consecutive years since 2017, but the net profit reached 205 million yuan in the third quarter of 2021, an increase of 228% over the same period last year. According to the analysis of the relevant people of the company, it is mainly the improvement of the net profit of permanent magnet material sales and the acceleration of product sales speed. According to the financial report, it takes 153 days for the company to sell batch-by-batch inventory of permanent magnet materials in the third quarter of 2020, but only 124 days in the third quarter of 2021, an acceleration of 19%.

So, can the listed companies in the middle and lower reaches of the industrial chain accept the price increase? Jinli permanent magnet related sources said that the sharp rise in the price of rare earth raw materials has objectively caused certain pressure on the costs of magnetic material deep processing enterprises, motor customers and even terminal application customers. People from relevant companies believe that the upstream and downstream of the industrial chain should have sustainable development and the supply chain should develop stably and coordinately, so that rare earths can be better used to contribute to the cause of carbon peak and carbon neutralization. People related to Jinfeng technology say the price of rare earths is too high and may reduce the use of rare earths later.

Rare earth industry experts said that large-scale magnetic materials factories can adopt the production and sales model of fixed production based on sales, and purchase rare earth raw materials in advance according to orders on hand, so as to reduce the risk of price fluctuations of rare earth raw materials to the company.