Rare earth sector: Up more than 80% in 22 trading days, the decline continues under the dual stimulus of policy favorable and exploding demand.

Since January 22, 2025, the rare earth sector of the Hong Kong stock market has experienced a boisterous period of continuous growth. During this period, the sector has seen continuous increases, with gains of 10.30%, 8.62%, 26.13%, and 7.92% on January 24, February 6, February 19, and February 24 respectively, accumulating to over 80% gains in 22 trading days up to now. Among these, the concept stock Jl Mag Rare-Earth (06680) has also seen an accumulated increase of over 85%, making its rise remarkable among various sectors and concept stocks. From a news perspective, there is no shortage of positive policies. On February 19, in order to implement the "Management Regulations for Rare Earths," the Ministry of Industry and Information Technology issued the "Total Volume Control Management Measures for Rare Earth Mining and Rare Earth Smelting and Separation (Temporary) (Public Consultation Draft)" (hereinafter referred to as "Control Management Measures") and the "Rare Earth Product Traceability Management Measures (Temporary) (Public Consultation Draft)" (hereinafter referred to as "Traceability Management Measures"), seeking public opinions. Among them, the draft of the "Control Management Measures" clearly states that rare earth mining enterprises and rare earth smelting and separation enterprises should be large rare earth enterprise groups promoted by the state, strengthening the leading position of China Rare Earth Resources And Technology and China Northern Rare Earth in the industry, which helps to increase the valuation of the companies. The "Traceability Management Measures" draft stipulates that the Ministry of Industry and Information Technology, together with the Ministry of Natural Resources, the Ministry of Commerce, the General Administration of Customs, and the State Administration of Taxation, will establish a rare earth traceability system to strengthen the overall process of rare earth product traceability management and promote data sharing among relevant departments. This will enhance the practical effect of controlling the total supply of rare earths, thereby significantly improving the ability to influence rare earth prices from the supply side. It is well known that rumors in the secondary market are usually not without basis. What profound implications does this policy favor bring to the sector? How will it help promote industry development? Enhancing supply side management, the significant intention of policy to stabilize prices Looking back at 2024, affected by factors such as market conditions and industry supply and demand cycles, the prices of major rare earth products fell rapidly in the first quarter, and then remained volatile at low levels in the second and third quarters. Entering the fourth quarter, some rare earth product prices started to rebound after hitting bottom. By the end of 2024, according to data from the China Rare Earth Resources and Technology Industry Association, the rare earth price index was 163.8 points, a decrease of 17.27% from the highest point of 198 points on January 2 of that year. In the spot market, the average price of praseodymium and neodymium oxide on December 31 was 39,800 yuan per ton, a decrease of 10.16% from the price of 44,300 yuan per ton at the beginning of the year. Affected by the downward trend in rare earth product prices, the performance of rare earth concept stocks in 2024 was mostly poor. In the first three quarters of 2024, Rising Nonferrous Metals Share and Inner Mongolia BaoTou Steel Union reported net losses of 276 million yuan and 516 million yuan respectively, with revenue declines of 43.85% and 6.94% respectively. During the same period, among the rare earth giants, only Xiamen Tungsten (600549.SH) achieved positive growth in net profit, with a year-on-year increase of 20.78% to 1.402 billion yuan, while revenue decreased by 10.70% to 26.369 billion yuan. China Northern Rare Earth (00769, 000831.SZ) experienced a decrease in both revenue and net profit, with a 13.5% drop in revenue to 21.560 billion yuan and a 70.64% decline in net profit to 405 million yuan. Looking at the performance of the rare earth concept stock Jl Mag Rare-Earth (06680) in the Hong Kong stock market, its performance has also declined. In its latest performance forecast, the company's net profit attributable to shareholders is expected to decrease by 42%-52% compared to the previous year in 2024, mainly due to a significant year-on-year decrease in the price of rare earth raw materials and the impact of costs and expenses related to its Ningbo and Baotou factories. In the current environment of fluctuating rare earth prices and generally poor performance of concept stocks, it is believed that the introduction of the draft of the "Control Management Measures" and "Traceability Management Measures" serves as a tonic injection, which is conducive to promoting the healthy, sustainable, and high-quality development of the rare earth industry. The draft of the "Control Management Measures" proposes a redefinition of the scope of rare earth indicators. It adds monazite ore as a rare earth ore indicator and overseas-imported rare earth ore products as indicators for rare earth smelting and separation. This adjustment means that companies will be strictly regulated when producing rare earth products through these two channels, resulting in a tightening of the supply side of rare earths. In 2024, the global production of praseodymium and neodymium oxide was about 105,000 tons. According to data from the General Administration of Customs of China and Baidu Union, in 2024, China imported approximately 83,487 tons of rare earth ore from major countries, which is equivalent to approximately 16,697.4 tons of praseodymium and neodymium oxide, accounting for 16% of the global supply in 2024. This part of the supply will be significantly impacted by national indicator control, increasing uncertainty in growth. In the past, the determination of rare earth indicators mainly relied on applications from various enterprises. Now, the rare earth indicator setting mode may undergo major changes, with annual rare earth indicators being directly researched and determined by the Ministry of Industry and Information Technology, the Ministry of Natural Resources, and the National Development and Reform Commission, further enhancing the macro-control of the rare earth industry by the state. The draft of the Traceability Management Measures introduces a brand-new concept of product traceability, applicable to enterprises involved in rare earth mining, smelting and separation, metal smelting, comprehensive utilization, and rare earth product export. Among them, rare earth recycling enterprises (comprehensive utilization enterprises) have had serious issues in the past, with some companies illegally mining rare earths for production. If the new measures are implemented, product traceability will effectively crack down on illegal supply, purify the rare earth market environment, and improve market transparency and standardization. This is of great significance for regulating the order of the rare earth market and ensuring the healthy and sustainable development of the industry.The farmers' market.It is worth mentioning that if the "Regulations on Regulation and Management" (draft) and the "Traceability Management Regulations" (draft) are officially implemented, they will form a combination with the "Rare Earth Management Regulations", which will officially start on October 1, 2024, further tightening and controlling the rare earth supply. From the perspective of industry supply and demand, the rare earth industry supply and demand are expected to maintain a tight balance in the future, and rare earth prices are expected to rise. In terms of short-term sentiment and long-term supply and demand logic, the future of the rare earth permanent magnet sector will be promising. Siasun Robot & Automation begins the "year of mass production", and rare earth demand is still vast The downstream applications of rare earth magnetic materials are broad, and according to Shanghai Securities News quoting Frost & Sullivan, the global consumption of high-performance rare earth permanent magnet materials is expected to grow at an average annual rate of 17.2% from 2023 to 2028. In terms of end demand, the growth in the fields of new energy vehicles, energy-saving inverter air conditioning, wind power generation, Siasun Robot & Automation, and industrial servo motors is worth noting. Among these, with the continuous maturity of Siasun Robot & Automation technology, industrial Siasun Robot & Automation and humanoid Siasun Robot & Automation are expected to become the next demand outbreak. Base data on facts. In the field of Siasun Robot & Automation and intelligent manufacturing, servo motors are key devices for controlling the flexible movement of Siasun Robot & Automation joints. They have high requirements for accuracy, speed, overload resistance, stability, and speed response capabilities. High-performance neodymium iron boron magnetic materials have become their ideal materials to help achieve lightweight while enhancing power density and reducing volume. In terms of industry development pace, the humanoid Siasun Robot & Automation industry is expected to enter the year of mass production in 25 years, followed by a commercial explosion in 26 years. On the international market, 2024 is the year in which global humanoid Siasun Robot & Automation prototypes are released, such as 1XTech releasing the bipedal humanoid Siasun Robot & Automation NEO, Kepler launching the pioneer K2, and Boston Dynamics releasing the electric humanoid Siasun Robot & Automation entering the atlas, among others. In 2025, the humanoid Siasun Robot & Automation industry is expected to enter the stage of mass production and centralized functional testing. Musk stated that Tesla will produce 10,000 Optimus Siasun Robot & Automation in 25 years. If all goes well, Tesla may start mass producing 10,000 units per month in the 26th year. On the domestic front, some leading companies have relatively early achieved small-scale production. UnitreeH1 under Ubtech Robotics, as the first humanoid Siasun Robot & Automation in China that can run, demonstrated its technical strength in the Spring Festival Gala in 2025, and completed the first batch of commercial small-scale deliveries in October 2023. As of January 6, 2025, the 1000th unit of the general-purpose humanoid Siasun Robot & Automation produced by Zhiyuan Siasun Robot & Automation officially offline, with a cumulative production of 731 bipedal humanoid Siasun Robot & Automation units. In addition, the new generation of industrial humanoid Siasun Robot & Automation from UBTECH ROBOTICS has also been successfully trained and is expected to begin mass delivery. With the humanoid Siasun Robot & Automation entering the "year of mass production," the market size of the industry undoubtedly rapidly expands. According to the "Humanoid Siasun Robot & Automation Industry Research Report", China has now become the world's leading producer of humanoid Siasun Robot & Automation, with the market size reaching approximately 27.6 billion yuan in 2024. It is expected to grow to a "billion-yuan market" by 2030. Referring to Goldman Sachs' prediction, the global humanoid Siasun Robot & Automation market size will reach $154 billion by 2035. Just the field of humanoid Siasun Robot & Automation alone can stimulate a demand scale of billions, and if combined with major application areas such as new energy vehicles and wind power, the future of rare earth demand is clearly promising. According to Guotai Junan Securities, as domestic rare earth indicators shift from a period of strong supply to a pattern of supply constraints, combined with overseas planning for increased capacity but slow actual capacity release, the effects of supply constraints are beginning to show. New energy vehicle and wind power demand continue to grow, and the equipment upgrade demand for industrial motors effectively raises the demand curve in 2025-2026, which may relay new energy sources as an important source of rare earth demand growth. Combined with the expansion of Siasun Robot & Automation applications, 2025 may see another great year for rare earth magnetic materials. In summary, it is not difficult to see that from a policy perspective, stricter supply control will alleviate the pressure of rare earth oversupply and push up the currently bottomed rare earth prices, helping to significantly improve the performance of rare earth magnetic materials. In addition, rare earth control policies will further strengthen the leading position of rare earth groups in the industry, benefiting valuation uplift. In terms of demand, with the acceleration of automotive electrification, intelligent humanoid Siasun Robot & Automation, drones, and other application areas, the future is promising for rare earth demand. Investment advice: Please consult your financial advisor.The long-term demand for rare earth permanent magnet high-efficiency motors is positive. Therefore, it is recommended to pay attention to domestic rare earth industry leaders, such as China Northern Rare Earth and China Rare Earth Resources And Technology. These stocks have strong resource barriers, stable market share, and benefit from the high demand for rare earths in the prosperous market.Hi! How can I help you today?