In two days, it surged over 6%, and the long-silent Rare Earth Metals GAINIANBANKUAI has made a striking return.

According to observations from Zhitong Finance APP, on January 6 and January 7, the Hong Kong stock market's Rare Earth Metals Sector continued to rise strongly, recording increases of 3.81% and 3.09% respectively, with both days' sector gains ranking high, performing impressively among various industry sectors. Among these, Jl Mag Rare-Earth (06680), as one of the leading companies in the industry, cumulatively rose over 7% in two days, currently priced at 8.07 HKD.

Looking back on the performance of the Rare Earth Metals Sector in 2024, it can generally be summarized as 'oscillating downward + bottoming rebound.' From the beginning of 2024 to early September, the sector was in a downward oscillation trend, with a cumulative drop of over 40%, while from late September to late December, the sector saw a recovery, with cumulative gains exceeding 43%. Looking at the entire year, the sector's cumulative decline was over 15%.

(Market source: Futu)

From a news perspective, this time, the Rare Earth Sector collectively rose, mainly benefiting from the continuous positive industry news recently and the growing expectations for downstream demand such as Electric Vehicles.

Specifically, the National Development and Reform Commission and other departments recently jointly issued the "Implementation Plan for Promoting the High-Quality Development of the New Energy Vehicles and Power Battery Industry," proposing a target of 10 million annual sales of Electric Vehicles by 2025, which will significantly boost the demand for Rare Earth Permanent Magnets. In addition, the USA, the EU, and other countries and regions are increasing their strategic reserves of Rare Earth Metals, which will also support Rare Earth prices.

Of course, as the saying goes, "There is no wind without a hole," it might be worthwhile to broaden our perspective and explore the deeper mysteries behind the continuous rise of the Rare Earth Sector.

With the decline in Rare Earth prices, the performance for 2024 will be hard to describe as "bright."

In 2020, the demand for Electric Vehicles began to explode, and the demand for boron iron from electric cars stimulated Rare Earth demand, particularly for praseodymium and neodymium oxide.

Prices soared from 0.26 million yuan per ton in April 2020 to 1.111 million yuan per ton in February 2022. This round of price increases lasted for a long time, but with subsequent slowdowns in the production and sales growth rates of Electric Vehicles, Rare Earth prices gradually fell.

Looking back at 2024, affected by market conditions and industry supply-demand cycles, the prices of major Rare Earth products quickly fell in the first quarter, while in the second and third quarters, Rare Earth product prices fluctuated at low levels. Entering the fourth quarter, some Rare Earth product prices improved and rebounded from the bottom.

As of December 31, according to data from the China Rare Earth Industry Association, the Rare Earth price index stood at 163.8 points, down 17.27% from the year's peak of 198 points on January 2. In the spot market on December 31, the average price of praseodymium and neodymium oxide was 0.398 million yuan per ton, a decrease of 10.16% from the price at the beginning of the year (0.443 million yuan per ton on January 2).

(Image source: CHINA RAREEARTH Industry Association)

Affected by the fluctuating decline in Rare Earth product prices, the performance of Hong Kong A-share rare earth concept stocks in the first three quarters of 2024 is overall poor, with most companies experiencing declines in revenue and profits.

In the first three quarters of 2024, among the major rare earth giants, only Xiamen Tungsten (600549.SH) achieved positive growth in net income, with net income increasing by 20.78% year-on-year to 1.402 billion yuan, while revenue decreased by 10.70% year-on-year to 26.369 billion yuan. On the other hand, China Northern Rare Earth (00769,000831.SZ) saw both revenue and net income decline, with revenue decreasing by 13.5% year-on-year to 21.56 billion yuan and net income declining by 70.64% year-on-year to 0.405 billion yuan.

Additionally, some rare earth concept stocks showed signs of losses. In the first three quarters of 2024, Rising Nonferrous Metals Share and Inner Mongolia BaoTou Steel Union reported net losses of 0.276 billion yuan and 0.516 billion yuan respectively, with revenue declines of 43.85% and 6.94%.

Furthermore, the performance of Jl Mag Rare-Earth (06680), a Hong Kong stock rare earth concept stock, also could not escape the downward trend—during the first three quarters of 2024, the company saw revenue decrease by 0.72% year-on-year to 5.014 billion yuan, with net income dropping by 60.17% year-on-year to 0.197 billion yuan.

Overall, the rare earth industry continues to adjust in 2024, with supply-demand relationships and geopolitical factors significantly impacting the industry. The growth rate of domestic rare earth mining indicators is slowing, with a reduction in imported ore volumes leading to tightening overall supply. On the demand side, growth in medium and high-end application areas is slowing, and the market remains oversupplied, causing prices to fluctuate narrowly at low levels. These factors collectively influence the performance of rare earth concept stocks.

The demand for rare earths continues to improve, with a new cycle expected to reshape by 2025.

In the short term, influenced by supply-demand relationships and geopolitical factors, the fluctuating decline in rare earth prices has resulted in a general decline in performance across the industry stocks.

A decline has become a confirmed fact, but in the medium to long term, strategic emerging industries are thriving, and the demand for rare earths continues to improve, which may help reshape the new cycle of the industry.

According to Zhizhong Finance APP, permanent magnet materials are the most significant and promising downstream application field of rare earths. Downstream rare earth refined processing materials include permanent magnets, hydrogen storage, lighting, polishing, catalytic materials, etc., among which permanent magnet materials are the main and most promising downstream application field of rare earths. Currently, the most widely used rare earth permanent magnet material is neodymium iron boron, which is light in weight, small in volume, has a high magnetic energy product, good mechanical properties, is easy to process, has a high yield, and excellent performance that can be magnetized after assembly. High-performance neodymium iron boron permanent magnet materials are mainly used in wind turbines, energy-saving variable frequency air conditioners, energy-saving elevators, electric vehicles, industrial robots, etc.

On the demand side, the rare earth industry chain's demand is expected to warm up under multiple catalysts in the fields of new energy vehicles, wind power, household appliances, and industrial robots.

Specifically, as the sales of Electric Vehicles rapidly increase and the penetration rate continues to rise, the demand for drive motors represented by permanent magnet Electric Machine, which are core components of Electric Vehicles, will be boosted, thereby driving the growth of demand for Rare Earth Permanent Magnets. Additionally, humanoid robots have become a new development track and are expected to further open the long-term growth space for Rare Earth Permanent Magnets. Furthermore, apart from the continuously growing demand for Electric Vehicles and industrial robots, the wind power industry is expected to see marginal improvements in demand by 2025.

On the supply side, the growth rate of the total control indicators for domestic rare earth mining is slowing, and import disruptions from regions such as the USA and Myanmar have made it difficult to increase the rare earth ore supply, with the supply surplus expected to improve by 2025.

In addition, the rare earth industry has also received support from policies during this period. On June 22, 2024, the State Council issued the "Regulations on Rare Earth Management," which will go into effect on October 1, 2024. The "Regulations" establish a governance system that is tiered from national to local and then to enterprises, ensuring that each level performs its responsibilities and duties, and for the first time sets penalty standards for illegal and irregular behaviors, further pressuring to guide the industry's order rectification, which is more conducive to standardized management in the rare earth industry.

In this context, Guolian Securities estimates that based on the calculations for high-performance neodymium iron boron in main application fields such as new energy vehicles, wind power, and industrial robots, the global demand for high-performance neodymium iron boron is expected to reach 0.174 million tons in 2024, an increase of 0.02 million tons year-on-year; of which, the demand for high-performance neodymium iron boron in new energy vehicles/wind power/industrial robots/variable frequency air conditioners/energy-saving elevators/consumer electronics and other fields is expected to be 7.3/3.5/1.4/0.017/0.01/0.008 million tons respectively.

In addition, the agency also predicts that global demand for praseodymium neodymium oxide will be 0.098/0.107/0.116 million tons respectively from 2024 to 2026; the global supply of praseodymium neodymium oxide is expected to be 0.103/0.107/0.111 million tons respectively; the supply-demand gap will be +0.54/+0.0005/-0.0045 million tons, with the supply-demand structure expected to continue improving from 2025 to 2026.

(Image source: Guolian Securities)

Based on the above, with the rebound of rare earth prices from the bottom and the continuous improvement of supply and demand patterns, the rare earth industry is expected to usher in a growth year in 2025.

Among them, GTJA pointed out that as domestic rare earth Indicators shift from a strong supply release cycle to a supply constraint pattern, coupled with significant planned increases overseas but slow actual release, the effectiveness of supply constraints is becoming evident. The demand for electric vehicles and wind power continues to grow, and the equipment upgrade demand for industrial Electric Machines effectively raises the demand curve for 2025-2026, which may continue to make new energy an important source of demand growth for rare earths; additionally, with the expansion of robot application scenarios, 2025 may once again usher in a growth year for rare earth magnetic materials.

Sinolink stated that since 2024, rare earth prices have been finding a bottom. Against the backdrop of significantly strengthened expectations of supply and demand improvement and the catalysis of 'supply-side reform' policies, commodity prices have risen nearly 20% from the bottom, with the price center gradually ascending; the rare earth management regulations implemented on October 1 have compressed supply, and Q4's peak season orders are gradually being fulfilled. Coupled with the upward trend in industry cost curves and frequent supply disturbances, a bullish outlook on rare earth price increases is maintained, and related concept stocks will face opportunities for fundamental bottom-up movements and value reassessment under 'supply-side reform' policies. Therefore, it is recommended to pay attention to China Northern Rare Earth (leader in light rare earths), Jl Mag Rare-Earth (leader in high-end magnetic materials, focusing on humanoid robots), and other relevant stocks.

"Looking far and wide, it is not difficult to see from the various data that with the confirmation of the bottom of rare earth prosperity in 2024, the rare earth sector is expected to welcome opportunities for value reassessment in 2025 benefiting from continuously improving demand and constantly evolving supply and demand patterns."