[SMM Analysis] Impact of Baosteel Sheets & Plates Incident on Rare Earth Supply Is Limited, Current Rare Earth Market Fundamentals Remain Unaffected

I. Nature of the Accident: Not in the Rare Earth Production Process

The facility that exploded was a 650 m³ saturated water and steam sphere tank at Baogang's rare earth steel sheet factory, not a rare earth mining or smelting facility. "Rare earth steel sheets" refer to finished steel products with added rare earth elements to improve material performance, not the rare earth raw materials themselves. These sheets are mainly used in high-end manufacturing fields such as railways, automobiles, and pipelines, and their production is located at the downstream application end of the rare earth industry chain. In terms of spatial layout, the distance between Baogang's rare earth raw material production site and the accident-affected sheet factory is quite far. The production of rare earth raw materials is concentrated in a series of specialized plants, which are geographically distinct from the sheet processing facilities. This industrial layout characteristic determines that the impact of an accident in a single link is limited.

II. Analysis of Industry Chain Impact: Concentrate Supply Unaffected

Within the Baogang Group, there is a clear division of labor, with its rare earth concentrate primarily supplied to China Northern Rare Earth for separation and smelting. Even if the sheet factory and related steel production lines need to halt operations for inspection, it will not directly affect the production and delivery of rare earth concentrate. After the accident, relevant staff from Bao Gang United Steel stated, "The cause of the accident cannot be determined at present; the affected production lines in the sheet factory have been completely shut down, and other lines not directly impacted will also gradually stop to cooperate with the investigation." Relevant personnel from China Northern Rare Earth have also clearly responded that although they have initiated a safety production self-inspection procedure, current production has not been directly affected by the explosion, and no notification of raw material supply interruption from Baogang has been received. The rare earth industry chain has a notable characteristic of segment isolation. From raw ore mining to concentrate selection, then to separation and smelting, and finally to material application, each link is relatively independent. This characteristic allows the impact of a local accident to be controlled within a limited scope, making it difficult to trigger a chain reaction throughout the entire chain

III. Current Market Structure: Complex Price Formation Mechanism

The Chinese rare earth market has unique structural features: high concentration upstream, but pricing power more often stems from midstream and downstream industry competition. According to SMM statistics, the Chinese market holds over 90% of the global rare earth market share, with the supply side mainly controlled by large groups such as China Northern Rare Earth, China Rare Earth, Shenghe Resources, Chen Guang Rare Earth, Jinxin Rare Earth, Gansu Rare Earth, and Keli. Each of these large groups wields varying degrees of influence in the rare earth separation and smelting processes. Meanwhile, downstream, large magnetic material enterprises such as JL MAG Rare-Earth, Zhong Ke San Huan, Zhenghai Magnetic Material, Dongxing Magnetic, Heli Magnetic, Antai Technology, and Ketei Magnetic control the manufacturing technology of rare earth permanent magnets, forming an integrated control over the entire rare earth resource from separation to smelting to casting. Rare earth prices also depend more on the capacity utilization rates, inventory strategies, and market demand of these three parties. In particular, alloy plants directly supply NdFeB and other magnetic material producers; their offers and the pace of capacity release are the key factors affecting short-term prices. From the perspective of global rare earth standing, China holds a dominant position in the global rare earth market. This dominance means that China's domestic rare earth pricing mechanism has a decisive impact on the global market. Even amid the wave of "de-globalization" promoted by some Western countries, China's rare earth sector continues to maintain its control over prices.

IV. Supply-Demand Fundamentals and Policy Support

The long-term trend of the rare earth market depends on supply-demand fundamentals and policy direction, rather than isolated incidents. Supply side: Rare earth supply remains stable in the short term, effectively meeting current demand. Demand side: Demand from emerging sectors such as new energy vehicles, wind power, and energy-efficient motors continues to grow. Policy side, China implements steady rare earth control policies, committed to promoting the development of the entire rare earth industry chain. These fundamental factors determine the long-term trend of the rare earth market and will not be altered by a single incident.

As of 18:00 Beijing time on January 19, 2026, Pr-Nd oxide was offered at 662,000-663,000 yuan/mt in the domestic market, while Pr-Nd alloy prices pulled back to around 800,000 yuan/mt. This price fluctuation was mainly influenced by the ongoing stalemate and bargaining between upstream and downstream players, representing a normal market adjustment with no direct link to the explosion incident.

The real risks in the rare earth market do not come from sudden accidents, but lie in long-term factors such as global supply chain restructuring and technological substitution. SMM also calls on global customers to view the rare earth market rationally, refrain from creating or spreading rumors, and make rational decisions.