China Northern Rare Earth: Pr-Nd and Other Rare Earth Products Fluctuate Downward, 2024 Net Profit Expected to Decline by 54.41%-59.9% YoY

SMM January 24 News:

On January 24, the stock price of China Northern Rare Earth continued the upward trend from the previous trading day, closing up 1.13% at 21.53 yuan/share.

The 2024 performance forecast released by China Northern Rare Earth on January 23 indicated that, based on preliminary estimates by the company's financial department, the net profit attributable to shareholders of the parent company for 2024 is expected to range from 950 million yuan to 1.08 billion yuan, a decrease of 1.29 billion yuan to 1.42 billion yuan compared to the same period last year (statutory disclosure data), down 54.41% to 59.90% YoY. The net profit attributable to shareholders of the parent company, excluding non-recurring gains and losses, is expected to range from 820 million yuan to 950 million yuan, a decrease of 1.37 billion yuan to 1.5 billion yuan compared to the same period last year (statutory disclosure data), down 59.10% to 64.71% YoY.

Regarding the main reasons for the decline in performance during this period, China Northern Rare Earth stated that in 2024, due to factors such as weak global economic growth and downstream demand growth falling short of expectations, the supply-demand relationship in the market was affected. Prices of major rare earth products, represented by Pr-Nd products, generally fluctuated downward, with average prices declining YoY. On the supply side, although the two batches of rare earth total control quotas issued by the state increased YoY, the growth rate slowed. The capacity for recycling rare earth resources in the market continued to expand, and imported ores impacted the supply-demand balance, leading to a steady increase in the market supply of rare earth products. On the demand side, competition in major application fields such as downstream rare earth magnetic materials remained intense. While industries such as NEVs, humanoid robots, and industrial motors developed rapidly, and the "program of large-scale equipment upgrades and consumer goods trade-ins" and "implementation of major national strategies and the development of security capabilities in key areas" policies boosted consumption, the growth in demand and its driving effect fell short of expectations, resulting in an overall weak performance in the rare earth market. Facing the unfavorable market situation of declining rare earth product prices, the company focused on its annual production and operation goals, deeply implemented the new development philosophy, built a new development pattern, and took on the responsibility of being the main force in constructing the "two rare earth bases," achieving new results in high-quality development. The company strengthened comprehensive budget management, strictly implemented total control quotas, optimized its operating model, further improved capacity utilization rates, actively ensured supply and stabilized prices, and maintained the healthy and stable development of the industry. In 2024, the company's production of rare earth smelting and separation products is expected to increase by approximately 1.63% YoY; rare earth metal production by approximately 20.78% YoY; magnetic material production by approximately 10.42% YoY; polishing material production by approximately 0.26% YoY; and hydrogen storage material production by approximately 19.78% YoY. The application field achieved mass production of rare earth permanent magnet motors. The company strengthened marketing system reforms, optimized product structures, and achieved record-high sales of rare earth lanthanum-cerium and Pr-Nd products, with market share continuously increasing. Sales of rare earth functional materials are expected to increase by approximately 7.40% YoY, and trading volume on the Baotou Rare Earth Products Exchange is expected to increase by approximately 11.37% YoY, with price influence continuing to rise. The company enhanced internal and external benchmarking, deepened cost reduction and efficiency improvement, reduced the processing cost per mt of rare earth by 5.1% YoY, strengthened financing management, optimized financing structures, and further reduced the comprehensive financing cost of interest-bearing liabilities. It strictly controlled expenses for key engineering projects, increased income and reduced expenditure to improve operational quality. Key construction projects and industry chain acquisitions progressed in an orderly manner. The first phase of the new-generation green mining, beneficiation, and smelting rare earth green smelting upgrade project invested by the company was completed and put into operation. The company invested in the construction of a recycling resource landfill project to provide strong support for production and operations. It reorganized Baotou Zhongxin Antai Magnetic Industry Co., Ltd., filling the gap in rare earth lanthanum-cerium metal production, complementing advantages, and strengthening and expanding the rare earth metal industry. It established a new company with Ningbo Zhaobao Magnetic Industry Co., Ltd. to construct a high-performance NdFeB magnetic material project, extending, supplementing, and strengthening the chain to enhance the company's magnetic material capacity and technical level. It also formed a joint venture with Fujian Golden Dragon Rare-Earth Co., Ltd. to build a rare earth oxide separation production line project, further enhancing the company's control over rare earth resources and its supply capacity for rare earth raw material products. The company accelerated its transformation and upgrading towards high-end, digital, and green development, deepened reform and innovation, promoted ESG management improvements, increased R&D investment, optimized the scientific research system and mechanism, strengthened performance evaluation and risk control, and accelerated the construction of the "two rare earth bases." Through comprehensive planning and measures, the company continuously improved the quality and efficiency of its high-quality development, striving to build a "world-class rare earth leading enterprise." Despite the company's multiple efforts to mitigate the impact of unfavorable factors on its operating performance, net profit attributable to shareholders of the parent company for 2024 declined YoY due to factors such as falling rare earth product prices.

The downward trend in prices of rare earth products such as Pr-Nd has put pressure on the performance of rare earth enterprises. Reviewing the price trend of Pr-Nd oxide in 2024 reveals that:

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Reviewing the average price trend of SMM Pr-Nd oxide, the average price on December 31, 2024, was 398,000 yuan/mt, compared to 442,500 yuan/mt on December 29, 2023, representing a decrease of 44,500 yuan/mt, or 10.06%. The annual daily average price of Pr-Nd oxide in 2024 was 391,871.9 yuan/mt, compared to 529,274.79 yuan/mt in 2023, representing a decrease of 137,402.89 yuan/mt, or 25.96% YoY. From the above data, it is evident that the YoY decline in the annual daily average price of Pr-Nd was more pronounced, posing challenges to the production and operations of enterprises.

Looking back at 2024 as a whole, domestic NdFeB blank production reached 280,000 mt, corresponding to a demand for Pr-Nd oxide of approximately 90,000 mt, which was roughly balanced with the production of Pr-Nd oxide in 2024. After experiencing fluctuations, the price of Pr-Nd oxide finally entered a rangebound fluctuation phase in Q4.

In Q1, the price of Pr-Nd alloy experienced a continuous decline due to the dual impact of overall market confidence being low and a lack of terminal orders. This downward trend not only affected market stability but also caused deep concern among many related enterprises and investors. As time went on, the situation did not improve but worsened. By the end of March, a severe inversion occurred between the raw material costs and actual selling prices of Pr-Nd alloy, meaning that metal plants faced significant economic pressure during production.

Under such circumstances, metal plants could no longer bear the losses caused by price reductions and decided to stop lowering product quotations in an attempt to stabilize the market and alleviate economic pressure. At this critical moment, positive news from the mining side brought new hope to the market. Encouraged by this favorable signal, the price of Pr-Nd alloy finally bottomed out, injecting a strong boost into the struggling market. As prices rebounded, market confidence gradually recovered, and the attitudes of investors and enterprises turned optimistic.

Since June, as downstream demand entered the traditional off-season, the market originally expected significant fluctuations in Pr-Nd alloy prices. However, the stable listing prices of China Northern Rare Earth provided a stabilizing force for the market. This strategy offered solid support for Pr-Nd alloy prices, preventing significant declines. Thus, in contrast to the sharp pullback in Q1, Pr-Nd alloy prices fluctuated within a narrow range during June-July, showing neither significant increases nor sharp declines.

As time progressed into August, the "September-October peak season" was approaching, and market demand for Pr-Nd alloy began to recover gradually. Driven by this seasonal positive factor, the price trend of Pr-Nd alloy turned positive again, showing signs of recovery.

In Q4, downstream market demand fell short of expectations, with orders mainly concentrated in large magnetic material enterprises, while small and medium-sized factories struggled to take orders. Some magnetic material enterprises indicated that they would begin holiday shutdowns at the beginning of the month, with production expected to resume on the eighth day of the Chinese New Year, resulting in a one-month shutdown period. The order-taking prices of magnetic material enterprises in the market were generally low, making it difficult for metal products to achieve high selling prices. Against the backdrop of some raw ore separation enterprises planning to suspend production for maintenance in January, the market supply of oxides became tight, leading to firm quotations from raw material suppliers, which further exacerbated the price inversion of metal products.

Entering 2025, the price of Pr-Nd oxide showed more increases than decreases, with its price center shifting upward. However, as the Chinese New Year approached, the year-end effect of the rare earth spot industry chain became increasingly evident, with overall market activity subdued and spot prices in the rare earth industry chain remaining stable. Regarding post-holiday rare earth price performance, many market participants believe that due to unresolved tight supply issues on the mining side, the price of Pr-Nd products in February may not follow the usual downward trend. On the contrary, influenced by the continued tight supply-demand relationship, Pr-Nd prices may maintain a pre-holiday rangebound and slightly strong trend. If there is a significant increase in orders on the demand side, Pr-Nd prices may even see a noticeable rise.