Rare Earth Policy Eased, Individual Stocks Soar: China Rare Earth's H Shares Surge Nearly 30%

Recent news about rare earths has continued to attract market attention. The Ministry of Commerce has recently approved a certain number of export license applications and pledged to enhance the efficiency of the approval process.

Buoyed by this news, related concept stocks have surged significantly. By the close of trading, China Rare Earth (00769.HK) and JL MAG Rare-Earth (06680.HK) rose by 29.41% and 2.71%, respectively.

Note: Performance of rare earth concept stocks

In terms of news, a spokesperson for the Ministry of Commerce stated regarding export control measures for medium-heavy rare earths that with the development of industries such as robotics and NEVs, the global demand for medium-heavy rare earths in civilian applications is growing steadily. As a responsible major country, China fully considers the legitimate needs and concerns of various countries in civilian applications and reviews export license applications for rare earth-related items in accordance with laws and regulations. It has approved a certain number of compliant applications in accordance with the law and will continue to strengthen the approval process for compliant applications. China is willing to further strengthen communication and dialogue with relevant countries on export controls to facilitate compliant trade.

This policy signal has alleviated market concerns about supply chain disruptions. A research report by Dongguan Securities pointed out that adjustments to national tariff policies and the release of industry policies in 2025 have further increased attention to the rare earth industry chain.

The securities firm also noted that, from a fundamental perspective, the supply side of the rare earth industry is accelerating reforms, while the demand side is witnessing new demand curves for rare earths driven by concepts such as humanoid robots and the low-altitude economy, propelling a rebound in the prosperity of the rare earth industry.

In addition, relevant institutions have pointed out that China's implementation of export controls on medium-heavy rare earths since April (accounting for 80% of global supply), combined with the impact of the Myanmar earthquake on transportation, has led overseas companies to scramble for inventory at high prices, with some varieties seeing price increases of over 200% in a single month.

Why are rare earths attracting market attention?

The first reason is the revolutionary demand from humanoid robots. According to Morgan Stanley's research report, a single humanoid robot consumes 0.9 kg of rare earth metals, equivalent to the demand from EVs, and may generate $800 billion in rare earth demand in the future. Tesla's Optimus pilot production line has been established, with each unit consuming 2-4 kg of NdFeB. If the global number of humanoid robots reaches 100 million units, the demand for magnetic materials will recreate a rare earth market.

The second reason is NEVs and the low-altitude economy. Each NEV uses approximately 2 kg of rare earths, while the demand for high-performance magnetic materials in the low-altitude economy (such as drones and electric aircraft) is also growing rapidly. China Securities pointed out that the price of dysprosium oxide in Europe is 15% higher than in China, and companies like Tesla have accepted a 35% price increase for magnetic materials.

Fundamentals of the rare earth industry continued to improve in Q1

In addition to being buoyed by external positive factors, the performance of the rare earth industry rebounded significantly in Q1 2025. For example, China's rare earth industry saw a 125% YoY increase in net profit in Q1, with operating revenue reaching 728 million yuan. During the same period, JL MAG Rare-Earth's net profit was up 57.85% YoY, and its magnetic material sales increased by over 40% YoY.

Guotai Haitong Securities stated that domestic export licenses have been gradually issued recently, and it is expected that overseas price increases will gradually be passed on to the domestic market. With the rise in the price center of rare earths, domestic rare earth magnetic material enterprises are expected to experience a double boost in performance and valuation. Priority should be given to leading enterprises in the resource and magnetic material sectors. The institution believes that domestic rare earth prices are currently at the bottom of a major cycle, and the price center is expected to continue rising in the future.

The brokerage also pointed out that the current domestic rare earth ore sector may have entered a destocking phase. Stimulated by rigid restocking demand overseas following export controls, and with the transmission of overseas rare earth price increases to the domestic market, ore shortages are expected to emerge, potentially amplifying the elasticity of price increases. Rare earth magnetic material enterprises are expected to experience a double boost in performance and valuation.