Hong Kong stock concept tracking | Total rare earth control policy is introduced, rare earth magnetic material sector second-stage reversal begins (with concept stocks)

On February 19, 2025, the Ministry of Industry and Information Technology of China issued the "Total Control Management Measures for Rare Earth Mining and Rare Earth Smelting and Separation (Temporary) (Draft for Solicitation of Comments)" and the "Management Measures for Traceability of Rare Earth Products (Temporary) (Draft for Solicitation of Comments)", which are important supporting regulations following the formal implementation of the "Rare Earth Management Regulations" in October 2024. Guotai Junan published a research report stating that in recent years, the production of rare earths in Myanmar has grown rapidly and has become the largest source of imports for China. However, due to the turmoil in the political situation and over-exploitation risks of resources, the supply may be subject to strong constraints. On the demand side, the domestic "Two New" policy strengthens the end-market cyclical prosperity, and rare earth prices are expected to steadily rise, with the second phase of the rare earth sector reversal likely to gradually begin. Reviewing the performance of the rare earth sector in 2020-2021, the first phase of stock prices led the rebound in rare earth commodity prices. Guotai Junan believes that the first phase reversal of the rare earth sector stock prices since the second half of 2024 has been basically completed, and the subsequent sector performance is expected to gradually improve with the steady recovery of rare earth prices. Guotai Junan believes that the rare earth reversal cycle has gradually begun, and rare earth prices are expected to steadily rise with supply and demand improvements. In addition, Guoxin Securities released a research report stating that this policy highlights the position of rare earths as a strategic resource through comprehensive chain management and group integration. With "full-caliber supply control + full-process traceability" as the core, it marks the entry of the China Rare Earth Resources And Technology industry into the stage of refined governance. With the rigid contraction of supply and resonance with emerging demand, the strategic value of rare earth resources will continue to be highlighted. In the short term, it is necessary to observe the detailed allocation rules and the implementation of imported ore control measures. In the long term, policy resonance with emerging demand is expected to drive the rare earth industry chain towards high value-added upgrades. Top enterprises with resource integration capabilities and compliance advantages may lead the industry landscape restructuring. Guotai Junan believes that the preferred logic of quantity increase is clear, and rare earth/magnetic material leaders that can contribute excess profits should be chosen. HK stocks of rare earth-related companies: Jl Mag Rare-Earth (06680): On the basis of completing the construction of a 40,000-ton high-performance rare earth permanent magnet material production capacity in 2025, the company plans to invest in the construction of the "Annual Production of 20,000 Tons of High-performance Rare Earth Permanent Magnet Material Green Smart Manufacturing Project" through its wholly-owned subsidiary Jinli Baotou Company. The project has a total planned investment of 1.05 billion yuan, a construction period of 2 years, and will use Jinli Baotou Company's own and self-raised funds.