China Northern Rare Earth Q4 rare earth concentrate transaction price up 6.22% QoQ. How will the rare earth market evolve? [SMM Analysis]

China Northern Rare Earth announced on the evening of October 9 that based on the pricing method for rare earth concentrates and the Q3 2024 rare earth oxide prices, the Q4 2024 rare earth concentrate transaction price is adjusted to 17,782 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 355.64 yuan/mt. Compared to 16,741 yuan/mt in Q3 2024, it increased by 1,041 yuan/mt, up 6.22% QoQ. The Q4 rare earth concentrate transaction price increase of 1,041 yuan/mt by China Northern Rare Earth and Baogang is in line with SMM previous expectations.

China Northern Rare Earth announced on the evening of July 9 that based on the pricing method for rare earth concentrates and the Q2 2024 rare earth oxide prices, the Q3 2024 rare earth concentrate transaction price was adjusted to 16,741 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 334.82 yuan/mt. Compared to 16,792 yuan/mt in Q2 2024, it decreased by 51 yuan/mt, down 0.3% QoQ. The announcement also showed that China Northern Rare Earth held the 25th meeting of the eighth board of directors and the first extraordinary general meeting of shareholders in 2023 on March 14 and March 30, respectively, approving the proposal on the pricing mechanism for routine related transactions of rare earth concentrates for 2022 and the forecast for 2023. The company agreed with its affiliate, Inner Mongolia Baogang United Steel, that starting from April 1, 2023, with the pricing formula for rare earth concentrates unchanged, the company's management will calculate and adjust the price of rare earth concentrates according to the pricing formula in the first ten days of the first month of each quarter, and will re-sign the rare earth ore supply contract or supplementary agreement and announce it.

On April 9, China Northern Rare Earth announced that based on the pricing method for rare earth concentrates and the Q1 2024 rare earth oxide prices, the Q2 2024 rare earth concentrate transaction price was adjusted to 16,792 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 335.84 yuan/mt. Compared to Q1 2024, it decreased by 3,945 yuan/mt, down 19.02% QoQ.

On January 9, China Northern Rare Earth announced that based on the pricing method for rare earth concentrates and the Q4 2023 rare earth oxide prices, the Q1 2024 rare earth concentrate transaction price was adjusted to 20,737 yuan/mt (dry, REO=50%) excluding tax, up 201 yuan/mt from Q4 2023, up 0.98% QoQ.

On October 8, 2023, China Northern Rare Earth announced that based on the pricing method for rare earth concentrates and the Q3 2023 rare earth oxide prices, the Q4 2023 rare earth concentrate transaction price was adjusted to 20,536 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 410.72 yuan/mt. The company would sign a new "Rare Earth Concentrate Supply Contract" with Baogang and execute related transactions according to the new contract.

On July 9, 2023, China Northern Rare Earth announced that based on the pricing method for rare earth concentrates and the Q2 2023 rare earth oxide prices, the Q3 2023 rare earth concentrate transaction price was adjusted to 20,176 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 403.52 yuan/mt. The company would sign a new "Rare Earth Concentrate Supply Contract" with Baogang and execute related transactions according to the new contract.

Previous announcements from China Northern Rare Earth showed that based on the pricing method for rare earth concentrates and the Q1 2023 rare earth oxide prices, the Q2 2023 rare earth concentrate transaction price was adjusted to 31,030 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 620.6 yuan/mt (Baogang still needs to complete decision-making procedures).

Previous announcements from China Northern Rare Earth showed that the Q1 2023 rare earth concentrate transaction price and the 2023 forecast are calculated according to the above formula and the Q4 2022 rare earth oxide prices, and agreed upon by both parties. The Q1 2023 rare earth concentrate transaction price was 35,313 yuan/mt (dry, REO=50%) excluding tax. For every 1% change in REO, the tax-excluded price changes by 706.26 yuan/mt.

From the changes in China Northern Rare Earth's 2024 rare earth concentrate transaction prices, it can be seen that the Q1 price slightly increased QoQ, the Q2 price significantly decreased QoQ, the Q3 price slightly decreased, nearly flat, and the Q4 price increased QoQ.

Since the end of July, downstream demand began to recover, driving up the prices of rare earth raw materials, especially Pr-Nd oxide. With the upward shift in the price center of rare earths, the rare earth concentrate price began to rise. According to the SMM survey, based on past practices and the performance of rare earth prices in the first three quarters of this year, the market has already anticipated the increase in the Q4 rare earth concentrate transaction price by China Northern Rare Earth and Baogang.

In terms of spot prices, according to the latest SMM quotes, the average price of Pr-Nd oxide on October 9 was 435,500 yuan/mt, down 500 yuan/mt from the previous trading day, a decrease of 0.11%. The increase in the October listing price by China Northern Rare Earth was lower than some market expectations, slightly suppressing the rise in the rare earth market. However, upstream holders' quotes remain firm. According to the SMM survey of downstream inventory and production schedules, current downstream enterprises' inventory is sufficient to support until mid-to-late October. The current rare earth market is mainly driven by just-in-time procurement, but the traditional "October peak season" effect still exists. Coupled with the cost support from the QoQ increase in the Q4 rare earth concentrate transaction price by China Northern Rare Earth and Baogang, most industry players are confident that rare earth prices in October are expected to see another wave of increase.