The Zhitong Finance App learned that Guotai Junan released a research report saying that since 3H, supply and demand pressures have all responded, and rare earth prices have gradually bottomed out. Beginning in 24Q2, due to a slowdown in quota growth, and a strong willingness on the part of manufacturers to raise prices after the sharp price drop, supply was marginally tightened, and the industrial chain continued to be removed; subsequent demand side also catalyzed purchases for NEV/wind power during the July-August peak season, so the price recovery is expected to continue. The valuation of the core target has reached a low level, and the sector is expected to lead the price and usher in valuation repair opportunities.

The grouping and standardization of rare earths is determined in the form of regulations, and supply concentration continues to rise. The Premier of the State Council recently signed a State Council decree promulgating the “Regulations on the Administration of Rare Earths”, which have been implemented since October 1. The general idea of the regulations is to promote the high-quality development of the rare earth industry, etc., including strengthening the protection of rare earth resources, improving the rare earth management system, promoting the high-quality development of the rare earth industry, and improving the supervision system for the entire rare earth industry chain. The core of the regulations targets the quota system, improving the national storage system, regulating industrial links such as smelting and separation/comprehensive use/import and export, etc., while encouraging research and development of new rare earth technologies and recycling of secondary resources. Currently, domestic quotas are concentrated on two companies, Northern Rare Earths and China Rare Earth Group. The publication of this document means that the clustering and standardized development of the rare earth industry is determined in the form of regulations, and the concentration of supply in the industry is expected to continue to increase.

Domestic integration has shown results, and rare earth supply constraints have been strengthened. In 2024, the first batch of heavy rare earth quotas were 10,140 tons, -7.3% year-on-year, and 12,4860 tons of light rare earths, +14.5%, down 7.6pct from the previous year's growth rate. Domestic supply concentration continued to increase, while there were many overseas project plans, but actual progress was slow, and rare earth supply-side constraints continued to strengthen.

Equipment renewal has revitalized magnetic materials, and new and old power resonance can be expected on the demand side. It is expected that the increase in magnetic material consumption for new energy vehicles and the warming demand for wind power will support the basic demand market. The equipment renewal policy to be implemented in 2024 may become a new driving force for rare earth demand. Based on the 24-27 industrial motor renewal implementation schedule of 10%/30%/40%/20%, global demand for praseodymium oxide is still expected to maintain a growth rate of about 10% in 24-26. Considering continued supply constraints, a reversal of industry mismatch is expected to gradually become apparent.

Risk warning: Downstream demand falls short of expectations, and overseas rare earth mine supply releases exceed expectations.