Policy Dividends Accelerate Industry Consolidation Prospects for Rare Earth Industry Recovery

Compared to the rapid increase in the recent price of zinc, lead, molybdenum and other metals, the rare earths that belong to the non-ferrous metals sector appear to have lost much of their value. In March of this year, China’s defeat in the WTO arbitration dispute on rare earth export restrictions caused the market to expect a significant reduction in the price of rare earths in China. However, since July, both the national and the corporate level, the intensity of the stimulation of the rare earth industry has significantly warmed up, the overall prosperity of the industry is expected to usher in the second half of the recovery opportunity.

On the afternoon of July 9, the Ministry of Industry and Information Technology and the Ministry of Finance jointly issued the “Administrative Measures for the National IoT Development and Rare Earth Industry Subsidy Funds”, which proposed a one-time award for the approved production capacity of rare earth mining enterprises through environmental protection verification. RMB/ton, smelting separation 1500 yuan/ton, metal smelting 500 yuan/ton. The above policies are undoubtedly good for the rare earth enterprises that have passed environmental protection verification and have a relatively large capacity. For rare earth-based products such as Baotou Rare Earth, the subsidy available will reach 100 million yuan.

As the export quotas and tariffs will disappear, the state will quickly clear out the social inventory, so as to boost the domestic rare earth market an important means. Although the 2013 purchase and storage policy has not been released after three rounds of talks and the progress is slower than expected, it will not prevent it from becoming an important factor in boosting the price of rare earths in the second half of this year. The brokerage report shows that if the amount of rare earth storage in 2013 is between 10 billion and 20 billion yuan, this will facilitate the clearing of rare earth hoarding stocks, and the rare earth price is also expected to stabilize and recover under this influence.

While the national support policies have been gradually introduced, the integration of rare earth groups has begun to accelerate. Xiamen Tungsten issued an announcement on July 9 that Xiamen Tungsten Rare Earth Group has been approved by the provincial government and approved by the Ministry of Industry and Information Technology, indicating that Xiamen Tungsten Rare Earth Group has formally entered into implementation. China Rare Earth Rare Earth Co., Ltd., a subsidiary of China Aluminum Corporation, recently signed the "Intent for Promoting Shandong's Rare Earth Enterprise Integration" with the Shandong Economic and Information Technology Commission and China Steel Research Group Co., Ltd., and the three parties will jointly build "Shandong Rare Earth Group." At the beginning of this year, the State Council’s proposal for the integration of large-scale rare earth enterprise groups led by six companies has made significant progress this month. The formation of rare earth groups will strengthen the control of rare earth prices in the future.

Among the listed A-share companies, Weihua Group, Guangsheng Nonferrous Metals, and Xiamen Tungsten Industry are the six major rare earth groups in the rare earth group plan approved by the State Council, which has the advantage of local resource integration. In addition, due to the rapid growth of traditional wind power demand recovery, the renewed demand for variable frequency air conditioners, automotive electronics and robots, and other emerging demands, Ningbo Yunsheng and other leading downstream companies with high-end NdFeB capacity will benefit first.