Zhongjin: Global supply and demand improvement and inventory reduction may further enhance the value of minor metal prices.

CICC released a research report stating that since 2020, the prices of minor metals such as antimony, tungsten, germanium, and rare earths have been systematically increasing, overall company profits have been positive, and valuation levels continue to decline. Looking ahead, the bank believes that although geopolitical conflicts are increasing, the improvement in global supply and demand and low inventory levels are expected to further boost minor metal prices. Corporate profits and growth prospects are expected to improve further, highlighting the attractiveness of valuations, and the value of investing in industry leaders significantly. Key points from CICC: Supply: Domestic supply growth rate is systematically slowing down, concentration of supply is increasing, and overseas supply increment is limited. As a relatively scarce advantage mineral in China, long-term overexploitation of minor metals has led to a decrease in resource grade and reserves. Strict environmental policies further constrain supply elasticity. Overseas supply is limited by technical and resource factors, requiring higher incentive prices and longer capital expenditure cycles, with limited supply increment. Demand: Emerging + traditional demand are both strong, and in the context of deglobalization, the demand for "strategic stockpiles" is becoming increasingly urgent, and the supply-demand disconnect caused by trade frictions deserves attention. The emerging demand for new energy vehicles, photovoltaics, and other emerging industries is flourishing, and high-end equipment manufacturing is further opening up demand growth. According to the bank's calculations, the proportion of emerging demand for antimony, tungsten, germanium, and high-end rare earth permanent magnets in 2023 is 24%/1%/10%/35%, with a CAGR of emerging demand from 2023 to 2027E of 16%/59%/63%/21%. Traditional demand is expected to benefit from the gradual implementation of steady growth policies such as domestic trade-ins for new ones and active overseas fiscal and monetary policies. In the context of deglobalization, the demand for "strategic stockpiles" of strategic minor metals in various countries is becoming increasingly urgent, and the supply-demand disconnect caused by trade frictions deserves attention. The bank expects the total demand CAGR for antimony, tungsten, germanium, and rare earth permanent magnets from 2023 to 2027 to be 3%, 4%, 15%, and 11% respectively. Price: Against the backdrop of escalating trade frictions, the tightening of global supply and demand combined with low inventories is expected to narrow the price difference between domestic and foreign markets, further boosting the central price in the domestic market. According to Asian Metal Network, except for praseodymium-neodymium oxide and dysprosium oxide, domestic inventory levels in November were at historical 67% and 43% percentiles, respectively, while antimony ingots, tungsten concentrates, and germanium metal inventories were at historical 19%, 2%, and 29% percentiles, respectively. Looking at the price difference between domestic and foreign markets, as of December 20th, the price difference in antimony between domestic and foreign markets compared to August 15th was 85%, and the price difference in germanium between domestic and foreign markets compared to July 3rd, 2023 was 40%. The strategic value of Chinese minor metals is becoming increasingly prominent, with significant value in investing in industry leaders. Since 2020, the prices of strategic minor metals have been systematically rising, and the three major cash flows of related companies have shown positive changes, accumulating strength for subsequent capital operations. The bank calculates that the average PE (TTM) of the antimony and tungsten industries has dropped to below the 25th percentile in the past five years, and the average PB (MBQ) of the upstream rare earth and rare earth permanent magnet industries has dropped to below the 40th percentile in the past five years. The bank believes that in the context of deglobalization, the strategic value of Chinese advantage minor metals is becoming increasingly prominent. With the trend of increasing domestic reserves and overseas investments, the profitability and growth prospects of industry leaders are expected to further improve, with significant room for capital operations and investment value. Risks: - Unexpected escalation of global trade frictions, unexpected overseas supply increases, lower-than-expected downstream demand, etc.