SMM February 20 News:
Influenced by the news on February 19 that the Ministry of Industry and Information Technology (MIIT) had publicly solicited opinions on the "Interim Measures for the Total Volume Regulation of Rare Earth Mining and Smelting Separation (Draft for Public Comment)" and other documents, rare earth spot prices saw a significant increase on February 20. In the stock market, the rare earth permanent magnets concept sector experienced a notable surge at the opening. By the close of trading on February 20, the rare earth permanent magnets concept rose by 1.34%. Among individual stocks: Chuangxing Resources hit the daily limit, Zhenghai Magnetic Material rose by 6.1%, Guangsheng Nonferrous Metals increased by 5.59%, and Hanghua Co., Yujing Co., China Rare Earth, Baogang Group, and Ningbo Yunsheng were among the top gainers.
SMM Analysis of the Impact of the New Document on the Future Rare Earth Market
To implement the "Rare Earth Management Regulations," effectively protect and rationally develop rare earth resources, safeguard ecological security, and promote high-quality development of the rare earth industry, the Raw Materials Industry Department of the Ministry of Industry and Information Technology drafted the "Interim Measures for the Total Volume Regulation of Rare Earth Mining and Smelting Separation (Draft for Public Comment)" and the "Interim Measures for the Traceability Management of Rare Earth Products (Draft for Public Comment)."
From the perspective of total volume control, the "Interim Measures for the Total Volume Regulation of Rare Earth Mining and Smelting Separation (Draft for Public Comment)" clearly states that the MIIT will collaborate with relevant departments to determine and publicly announce compliant enterprises for rare earth mining and smelting separation. Except for specifically approved enterprises, other organizations and individuals are prohibited from obtaining rare earth mining quotas or engaging in related production activities. This measure aims to protect rare earth resources, prevent excessive and illegal mining, avoid resource overconsumption, and promote the sustainable utilization of rare earth resources. In the past, due to insufficient regulation, some enterprises engaged in disorderly mining of rare earths, leading to resource waste and ecological damage. By introducing total volume control measures, resource extraction can be reasonably planned, ensuring sufficient resource reserves for future development while meeting current demand.
The total volume regulation measures effectively curb illegal production at the source by restricting production entities and setting production quotas, thereby standardizing the sources of rare earth products in the market. Meanwhile, the "Interim Measures for the Traceability Management of Rare Earth Products (Draft for Public Comment)" requires rare earth enterprises to establish a product flow record system, detailing the circulation information of rare earth products and uploading relevant data to the traceability system by the 10th of each month. This initiative not only enhances transparency in the circulation of rare earth products but also enables rapid tracing of the source when illegal products enter the market, effectively combating illegal transactions, maintaining market order, reducing speculative activities, stabilizing rare earth product prices, and promoting coordinated development across the upstream and downstream industry chain.
SMM believes that under the impetus of the total volume regulation policy, enterprises will face stricter production quotas, requiring them to shift away from traditional extensive production expansion and instead increase investment in technological innovation and resource utilization efficiency. To achieve higher economic benefits within limited quotas, enterprises are actively developing new processes and technologies, enhancing the added value of rare earth products, and driving industry upgrades from low-end to high-end. 》Click to View Details
Price Center of the Rare Earth Industry Chain Shifts Upward; Pr-Nd Oxide Surges by 2.42%
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Regarding spot prices: On February 20, influenced by the release of the new document, confidence in the rare earth spot market surged. In the early morning trading session, rare earth holders significantly raised their quotations and were reluctant to sell at low prices. The price center of the rare earth industry chain shifted upward noticeably, with prices "soaring rapidly." However, downstream purchasing capacity was limited. By midday, prices dropped back slightly. The average price of SMM Pr-Nd oxide on February 20 was ultimately reported at 444,500 yuan/mt, up by 10,500 yuan/mt from the previous trading day, an increase of 2.42%.
Regarding the future market for rare earths, the "Interim Measures for the Total Volume Regulation of Rare Earth Mining and Smelting Separation (Draft for Public Comment)" and the "Interim Measures for the Traceability Management of Rare Earth Products (Draft for Public Comment)" are still in the public consultation stage. The final versions are expected to undergo adjustments but will ultimately promote the high-quality development of the rare earth industry. Future developments will depend on the announcement of specific rare earth mining quotas and the release of terminal order demand.
Institutional Opinions
CITIC Securities' research report pointed out that, at the policy level, the draft for public comment on the detailed rules of the Rare Earth Management Regulations emphasizes that rare earth quotas will only be issued to rare earth groups. They believe that rare earth resources may further concentrate within large rare earth groups in the future, and the control of imported ores may be further strengthened. The rigid logic of supply-side constraints in the rare earth industry will continue to be reinforced. The release of the draft for public comment on the traceability management measures for rare earth products will also contribute to the standardized development of the rare earth industry. On the demand side, 2025 is expected to mark the first year of mass production for humanoid robots. The industry is breaking through critical points at a super-linear speed, and high-performance NdFeB, as a key material for robot motors, is expected to benefit significantly in the future. Rare earths are strategic resources for the nation. Through total volume management and traceability systems, the safety of strategic resources can be ensured, promoting high-quality industry development. They continue to recommend the strategic allocation value of the rare earth permanent magnets sector.
Guojin Securities believes that the implementation of the "Total Volume Regulation Measures" marks the beginning of supply-side reform in the rare earth industry. They anticipate that subsequent policies and industry consolidation may follow. Against the backdrop of global geopolitical fluctuations, the strategic value of rare earths is expected to increase further. The industry's fundamentals are also in a recovery phase, and rare earth groups and magnetic material targets involved in the humanoid robot industry chain are expected to benefit significantly. They suggest paying attention to China Rare Earth, China Northern Rare Earth, JL MAG Rare-Earth, and Zhongke Sanhuan. Risk warnings: demand falling short of expectations, supply exceeding expectations, and rare earth price fluctuations.
Guotai Junan believes that in recent years, Myanmar's rare earth production has grown rapidly, becoming China's largest source of imports. However, due to political turmoil and the risk of resource depletion, supply may face strong constraints. On the demand side, China's "program of large-scale equipment upgrades and consumer goods trade-ins" policy intensifies the terminal prosperity cycle, and rare earth prices are expected to show steady growth. The second phase of the rare earth sector's reversal may gradually begin.
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》New Document Released! What Impact Will It Have on the Future Rare Earth Market? [SMM Commentary]
