Financial Associated Press, January 6 (Reporter Wang Bin) The rare earth industry has a major change as the new year begins. On January 2, China Northern Rare Earth (600111.SH) did not release the listing price for January rare earth products as scheduled, causing market speculation. As of the afternoon of January 6, the official website of China Northern Rare Earth still had not released the listing price.

"Because the company has adjusted its operation strategy, the release of listing prices will be canceled starting this January. The company will reference the daily prices published by Inner Mongolia BaoTou Steel Union (hereinafter referred to as 'Rare Earth Exchange') for future long-term contracts," a related person from China Northern Rare Earth confirmed to the Financial Associated Press. This means that the listing price of China Northern Rare Earth, regarded as a barometer for the rare earth industry and the global supply chain, may fade into history.

Notably, a person related to the Rare Earth Exchange told the Financial Associated Press that it began publishing its own daily quotes for rare earth products from its platform since November last year, now collecting prices from nearly 140 rare earth-related enterprises nationwide every day. In the future, the Rare Earth Exchange will also publish a spot price index, expected to go live in August 2026. The purpose of this is to create the Baotou price index and provide price guidance for the all market.

Several industry insiders told the Financial Associated Press that China Northern Rare Earth's cancellation of listing prices using daily prices means that the company's long-term contracts will be more market-oriented. However, since the Rare Earth Exchange is a trading platform controlled by China Northern Rare Earth, the Rare Earth Exchange will control both pricing and trading, leading to concerns as China Northern Rare Earth acts as both athlete and referee.

What is the impact of canceling the listing price on the rare earth industry chain?

Public information shows that the listing price of China Northern Rare Earth can be traced back to 2013. In recent years, the company has released the listing price for the current month on its official website on the first working day of each month.

According to Inner Mongolia BaoTou Steel Union's disclosure, the rare earth reserves of the Bayan Obo deposit are 35 million tons expressed as oxides, accounting for 81% of the country's rare earth reserves, while China Northern Rare Earth is currently the only customer for the company's rare earth concentrate products. Industry insiders told reporters that most of the leading magnet material companies in the domestic market are customers of China Northern Rare Earth. Therefore, the listing price of China Northern Rare Earth has also become an industry barometer.

China Northern Rare Earth previously stated on the investor interaction platform that the company's sales model for rare earth raw material products is primarily based on long-term agreements. The company generally sells rare earth products according to the listed price, which is determined monthly, and if market prices fluctuate within the month, the sales price of the products will not be adjusted.

Now, without the benchmark listing price, what will be the impact on the trade of the rare earth industry chain?

Industry analysts told the Financial Associated Press that the listing prices of China Northern Rare Earth are mainly used for signing long-term agreements, so the largest impact from the adjustment will be on its long-term agreement clients. Previously, about 30% of China Northern Rare Earth's long-term agreements were signed at prices quoted on third-party websites, and going forward, they will likely no longer consider third-party website prices.

A relevant person from the leading heavy rare earth group, CHINA RAREEARTH, stated to reporters that the listing prices have a relatively long cycle and significant fluctuations. The cancellation of listing prices by China Northern Rare Earth in favor of daily pricing suggests that long-term agreement prices are expected to become spot prices, which is more aligned with the market and helps to enhance the stability of rare earth market prices. A representative from CHINA RAREEARTH told reporters that the company has an internal pricing mechanism and will also reference market prices from third-party sources like Baichuan Network. It has been revealed that industry long-term agreement clients are basically negotiating prices, rather than simply agreeing to the listed price.

An insider from a listed company dealing in Rare Earth Permanent Magnets stated to reporters that the current mainstream in the rare earth market is real-time pricing, and if China Northern Rare Earth signs long-term agreements based on the daily prices set by the Rare Earth Exchange, it will be bullish for the company's performance. "In the past, the listing prices were persistently lower than the market, and some long-term agreements had discounts. When the listing price was high, downstream customers were unwilling to buy; conversely, when the listing price was low compared to the market price, it also posed risks for China Northern Rare Earth. Now buying and selling at market prices that follow market fluctuations should generally be beneficial for the raw material sales of China Northern Rare Earth."

Rising Nonferrous Metals Share also stated to the Financial Associated Press that China Northern Rare Earth's advantages lie in the light rare earth sector, predicting that the impact on heavy rare earth trading will not be significant, and the long-term influence will still depend on the balance of supply and demand in the market. A representative from Yantai Zhenghai Magnetic Material also mentioned to reporters that market conditions have fluctuated greatly in recent years and that the company primarily engages in market price procurement, hence the cancellation of the listing price by China Northern Rare Earth does not have a significant impact on the company.

However, some industry insiders expressed concern to the Financial Associated Press that the release of rare earth product quotes means having the power to regulate market prices, "In the future, if China Northern Rare Earth can directly control the discourse on market prices through the Rare Earth Exchange, it means that China Northern Rare Earth will act as both the athlete and the referee, heightening industry concerns."

Aiming to launch the "Baotou Index" for rare earth price trading.

According to reporters from the Financial Association, the reason why China Northern Rare Earth is willing to adopt the Quote from the Rare Earth Exchange is that the Baotou government intends to create a Rare Earth price trading "Baotou Index." "Everything we are doing now is to gradually establish the Baotou price index, giving the All Market a price guideline," revealed a related person from the Rare Earth Exchange.

The official website of the Rare Earth Exchange shows that the company was established in August 2012 with a registered capital of 0.216 billion yuan. It is the only electronic trading platform in China that specializes in various Rare Earth products as trading varieties, aiming to build a third-party trading platform for the Rare Earth Industry with national credibility.

Public data shows that China Northern Rare Earth Holds 44.56% of the equity of the Rare Earth Exchange and indirectly holds 2.23% through Gansu Rare Earth New Materials Co., Ltd., making it the largest Shareholder with actual control over it. In addition, the "shareholder group" of the Rare Earth Exchange also includes 12 companies such as CHINA RAREEARTH Group Co., Ltd., CHINA RAREEARTH Group Industry Development Co., Ltd., Xiamen Tungsten, and Gansu Rare Earth New Materials Co., Ltd., each holding 4.62%.

From the perspective of the Rare Earth Exchange, relying on the spot trading platform of China Northern Rare Earth is its greatest advantage. "The annual trading volume of neodymium oxide from China Northern Rare Earth accounts for about 70% of the Volume of the Rare Earth Exchange. Our spot trading volume is the largest in the country. Based on real transactions, we collect market prices and calculate the daily Quote for Rare Earth products according to certain weights and coefficients, which is more verifiable than other websites."

It is reported that by the end of October 2024, the cumulative online trading volume (REO) of the Rare Earth Exchange reached 0.1024 million tons, with a transaction amount of 11.635 billion yuan, and the number of registered enterprises reached 987. In the past three years, the total trading volume on the platform has reached 0.27 million tons (REO), with a total transaction amount exceeding 52.5 billion yuan, covering 36 categories of light, medium, and heavy Rare Earth.

In fact, there have long been traces of the Rare Earth Exchange's efforts to create the Rare Earth price trading "Baotou Index."

The "2024 Baotou City Government Work Report" clearly states the need to accelerate the transition of the Rare Earth industry from "world-class reserves" to "world-class industry," exploring the establishment of a compliant and reasonable Rare Earth price formation mechanism, and launching the Rare Earth price trading "Baotou Index."

In October 2024, Meng Fanying, Secretary of the Party Committee and Chairman of Inner Mongolia BaoTou Steel Union, stated during a research visit to the Rare Earth Exchange that efforts should be accelerated to promote the preliminary preparations for the release of the Rare Earth price trading "Baotou Index" and further enhance the industry influence of the Rare Earth Exchange.

In December of last year, the Rare Earth Exchange held a price collection seminar that revealed, "Since the beginning of this year, the Rare Earth Exchange, in collaboration with Inner Mongolia University of Technology, has been working on the rare earth trading price index, determining the compilation ideas for the spot price index of rare earth products and the price trend index of rare earth products. As of now, the Rare Earth Exchange has completed five rounds of sample data collection from 136 companies, the spot price index has entered the weight calculation phase, and the price trend index has entered the data accumulation phase."