CICC: In July, the export of magnetic materials significantly recovered, and domestic praseodymium and neodymium prices are expected to rise further

According to the report released by China International Capital Corporation (CICC), based on data from Chinese customs, in July, China exported 5,577 tons of rare earth magnetic materials, with a year-on-year and month-on-month increase of 6% and 75%, respectively. Since April this year, China's magnetic material exports have first decreased and then increased, with July's exports exceeding the average level of the same period in the past three years by 10%. As of August 20, the domestic price of praseodymium-neodymium oxide was reported at 624,000 yuan/ton, an increase of 57% compared to the beginning of this year and 39% compared to the highest point in the first half of the year. Given the arrival of the peak demand season and the improvement in export demand, along with the contraction of imported ore from Myanmar and limited increases in other supplies, the tightening supply and demand for domestic praseodymium-neodymium oxide is expected to drive domestic prices further upward.

CICC's main viewpoints are as follows:

Since April this year, China's magnetic material exports have first decreased and then increased, with July's exports exceeding the average level of the same period in the past three years by 10%

According to Chinese customs data, in April and May this year, China's rare earth magnetic material exports decreased by 43% and 74% year-on-year, and by 51% and 53% month-on-month. In June and July, China's rare earth magnetic material exports decreased by 38% year-on-year and increased by 6%, with month-on-month increases of 157% and 75%. From January to July, China's cumulative rare earth magnetic material exports decreased by 15% year-on-year, and from April to July, the cumulative decrease was 36%. Given the pressure on domestic rare earth magnetic material exports from April to June, which led to a backlog of export orders, and the accelerated approval process for rare earth-related exports, magnetic material exports are expected to continue to recover.

The arrival of the downstream procurement peak season combined with improved exports leads to an overall positive domestic demand for magnetic materials

According to CICC's estimates, in 2024, rare earth magnetic material exports will account for about 24% of domestic total demand. Considering that it is currently the peak procurement season for downstream magnetic materials, combined with improved exports, the overall domestic demand for magnetic materials is expected to continue to improve.

Contraction of imported ore from Myanmar and limited increases in other supplies tighten domestic rare earth supply

In terms of imported ore, in July, China's imports of REO from Myanmar increased by 2% year-on-year but decreased by 60% month-on-month, while imports of rare earth ore from the United States increased by 37% year-on-year. Considering the ongoing disturbances in Myanmar and the announcement by MP Company on April 17 to stop exporting rare earth concentrates to China, the increase in imported ore is limited. Domestically, considering the cumulative decrease in magnetic material exports from January to July and the current low price background of rare earths, domestic mining supply is unlikely to see significant growth.

In the short term, domestic praseodymium-neodymium oxide prices are expected to rise further. As of August 20, the domestic price of praseodymium-neodymium oxide was reported at 624,000 yuan/ton, an increase of 57% compared to the beginning of this year and 39% compared to the highest point in the first half of the year. Given the arrival of the peak demand season and the improvement in export demand, along with the contraction of imported ore from Myanmar and limited increases in other supplies, the tightening supply and demand for domestic praseodymium-neodymium oxide is expected to drive domestic prices further upward. In the medium to long term, from 2025 to 2027, the supply and demand for domestic praseodymium-neodymium oxide is expected to gradually tighten, pushing the price center of praseodymium and neodymium upward.

Regarding the targets

For rare earth upstream, it is recommended to pay attention to leading companies with strong resource attributes and good production growth, including Northern Rare Earth (600111.SH) and Rnm (600259.SH). For rare earth magnetic materials, it is recommended to focus on leading companies that are first to position themselves in the humanoid robot field and actively layout in new energy vehicles and energy-saving motors, including JLMAG (300748.SZ, 06680), Ningbo Yunsheng (600366.SH), Zhong Ke San Huan Co., Ltd. (000970.SZ), and Zhenghai Magnetic Materials (300224.SZ) Risk Factors

Rare earth supply exceeds expectations, domestic and foreign policy changes exceed expectations, export and downstream demand fall short of expectations