【SMM Analysis】Pr-Nd Alloy Profits Hit 2-Year High as Raw Material Costs Decline

SMM, March 20: As of this week, the weekly net profit of Pr-Nd alloy reached 36,812.4 yuan, with a net margin of 4.1%. Compared with last week, net profit increased 134%, setting a new profit high for the past nearly two years. The main reasons behind this were the decline in raw material costs and relatively high metal quotes.

The main raw material for Pr-Nd alloy is Pr-Nd oxide, which accounted for more than 95% of its cost. Recently, affected by market sentiment, Pr-Nd oxide futures prices kept falling. Some traders lacked confidence in future prices and proactively cut prices to make shipments, which in turn caused Pr-Nd oxide spot prices to continue declining. Under this impact, the cash cost of Pr-Nd alloy had fallen significantly for three consecutive weeks, dropping 16.9% from 1,071,789.2 yuan at the end of February to 890,687.6 yuan.

As for why Pr-Nd alloy quotes remained relatively high, the reason was that as the decline in Pr-Nd oxide prices continued to widen, cost pressure from inventory at metal enterprises became increasingly prominent. At the same time, spot inventory of Pr-Nd alloy was tight, and metal enterprises' production schedules for orders were relatively full, further intensifying their reluctance to sell at low prices. Against the backdrop of continued pullbacks in Pr-Nd oxide prices this week, although metal enterprises also lowered their quotes, the decline was smaller than that of Pr-Nd oxide. Moreover, when Pr-Nd oxide prices pulled back sharply, metal enterprises generally chose to suspend quotations to avoid wild swings in raw material market prices. Although the pullback in Pr-Nd oxide prices provided metal enterprises with an opportunity to buy low-priced raw materials to hedge against inventory cost pressure, under the market mentality of “rush to buy amid continuous price rise but refrain from selling amid falling prices,” their procurement behavior remained relatively cautious, mainly consisting of small-volume restocking for rigid demand, so inventory cost pressure still remained. In the short term, as market sentiment recovered, Pr-Nd oxide futures prices will be raised, and its spot prices will also recover accordingly. This change will push up the cash cost of Pr-Nd alloy, thereby reducing the net profit of Pr-Nd alloy.