China Fund News reporter Lu Yuan
Rare earth is an indispensable element and a key strategic resource in modern industry.
On June 29, the State Council officially issued the "Regulations on the Management of Rare Earths", clarifying the management requirements for rare earth mining, smelting and separation, establishing a total volume control system, and standardizing the comprehensive utilization of rare earths.
In this regard, the two major rare earth giants in the north and south, which have a pivotal position in the domestic rare earth industry, have given positive comments.
Liu Peixun, chairman of Northern Rare Earth, pointed out that the "Regulations on the Administration of Rare Earths" for the first time in the form of administrative legislation to regulate the development and utilization of rare earth resources, is a "milestone" overarching and comprehensive basic regulations.
Ao Hong, chairman of China Rare Earth Group, believes that the issuance and implementation of the "Rare Earth Management Regulations" is conducive to deepening the supply-side reform of the rare earth industry and ensuring the safety and stability of the supply chain of the strategic resource industry chain.
It is worth noting that the current rare earth supply pattern at home and abroad has undergone important changes.
On the one hand, the global competition pattern of rare earth supply has gradually emerged, and overseas countries are actively building a rare earth supply chain independent of China, and the diversification of the supply side is accelerating.
On the other hand, China Rare Earth Group will fully complete the integration of medium and heavy rare earth resources in mainland China in 2023, and the combing and integration of its internal assets is also becoming increasingly prominent. Among them, what has attracted much attention is how to solve the problem of competition between the two A-share listed companies Guangsheng Nonferrous Metals and China Rare Earth.
Milestone significance
For the "Rare Earth Management Regulations" issued this time, Ge Honglin, President of China Nonferrous Metals Industry Association, Ao Hong, Chairman of China Rare Earth Group, and Liu Peixun, Deputy General Manager of Baotou Steel (Group) Company and Chairman of Northern Rare Earth, issued a document on the official website of the Ministry of Industry and Information Technology on June 29 to interpret it.
Liu Peixun pointed out that the "Regulations on the Administration of Rare Earths" for the first time in the form of administrative legislation to regulate the development and utilization of rare earth resources, is a landmark overarching, comprehensive basic regulations. The "Rare Earth Management Regulations" establish a governance system from the state to the local level and then to the enterprise hierarchical management, each performing its own duties and taking its own responsibility, and for the first time set punishment standards for violations of laws and regulations, further pressurizing and guiding the rectification of the industry order, which is more conducive to the standardized management of the rare earth industry.
Ge Honglin said that the mainland rare earth industry is large but not strong, complete but not refined problems still exist, in the system guarantee convergence, resource protection development, ecological environmental protection, original basic innovation, industry order norms and other aspects are still facing some difficulties and challenges, "rare earth management regulations" highlight the characteristics of protective development and adhere to green development, will effectively reduce the industry's demand for non-renewable mineral resources, extend the life of mainland mineral resources mining, reduce the harm of waste discharge to the natural ecology, Vigorously promote the safe, green and sustainable development of the rare earth industry in the mainland.
Ao Hong pointed out that rare earth is an indispensable key material for the transformation and upgrading of traditional industries, the development of strategic emerging industries and the national defense science and technology industry. With the transformation and upgrading of strategic emerging industries such as new energy vehicles, wind power generation, and intelligent manufacturing, as well as traditional industries such as energy-saving motors, the global demand for rare earths has increased rapidly.
In Ao Hong's view, there are still some deep-seated problems in the development of the mainland rare earth industry, especially in the process of greening, high-end products, manufacturing intelligence needs to be improved, the industrial structure needs to be further optimized, the industrial order needs to be further standardized, the release and implementation of the "rare earth management regulations" is conducive to deepening the supply-side reform, ensuring the safety and stability of the strategic resource industry chain supply chain.
The supply pattern of rare earths at home and abroad has undergone important changes
From the perspective of the supply side, unlike more than 10 years ago, the current global competition pattern of rare earth supply has gradually emerged.
In fact, rare earth resources are distributed in many regions of the world, but the degree of development and utilization is different. According to the data released by the United States Geological Survey in 2024, the global rare earth ore reserves are about 110 million tons, of which China is about 44 million tons, accounting for 40%.
However, in recent years, rare earths, as a key strategic element, have attracted increasing attention from countries around the world. Overseas countries are actively building rare earth supply chains independent of China, and supply-side diversification is accelerating. The United States, Australia and other countries have formed or are forming large-scale development of light rare earth ore mining and separation, and the production capacity is expanding rapidly. Southeast Asian countries have accelerated the development of medium and heavy rare earth resources, and have become an important medium and heavy rare earth supply area outside China.
At the same time, domestic rare earth enterprises are also importing rare earth raw ore and processed products from overseas, and the mainland has become one of the world's largest rare earth importers, which has also become an important variable affecting the domestic medium and heavy rare earth supply pattern.
Compared with the northern light rare earths that were formed earlier in the competitive pattern, the medium and heavy rare earths in southern China have attracted more attention from inside and outside the industry, and the new central enterprise China Rare Earth Group, whose main business focuses on medium and heavy rare earths, and its two listed companies have also attracted more attention from the capital market.
On the domestic supply side, the pattern of China's rare earth industry in 2023 has also undergone major changes, and China Rare Earth Group has fully completed the integration of medium and heavy rare earth resources in the mainland, further strengthening the ability to independently control and guarantee resources, and the industry covers 9 provinces and regions including Jiangxi, Hunan, and Guangdong, as well as relevant countries and regions in Southeast Asia.
Not only that, in 2024, China Rare Earth Group will continue to sort out the relevant situation of internal assets, actively seek external industrial investment opportunities, and pay close attention to the integration opportunities of high-quality resource assets.
In response to how to solve the problem of peer competition between Rising Nonferrous Metals and China Rare Earth, China Rare Earth responded at the 2023 performance briefing on May 13 that according to the relevant commitment letter issued by China Rare Earth Group, the actual controller of the company in January 2022, for the peer competition with China Rare Earth, it will comprehensively use entrusted management, asset restructuring, equity replacement/transfer, business adjustment or other legal methods to steadily promote the relevant business adjustment or integration to solve the problem of peer competition within five years from the date of issuance of the commitment. At present, the commitment of the actual controller of the company is being fulfilled normally.
Rare earth prices plummeted, but they continued to increase their positions in China's rare earths
As a strategic minor metal, the price of rare earth products has been fluctuating due to the relationship between supply and demand.
In 2023, affected by the changes in rare earth supply and demand and the slow recovery of the global economy, the rare earth market will be up and down, and the price of products will fall all the way due to problems such as unexpected upstream supply, overcapacity in the midstream, and weak downstream demand.
In the first quarter of 2024, the prices of some rare earth products have dropped significantly, with the rare earth price index decreasing by more than 30% year-on-year, and the prices of some products decreasing by more than 40% compared with the beginning of the year.
Starting from April 2024, rare earth prices will fluctuate upward, and the prices of light rare earth elements such as praseodymium and neodymium will be strong and repeatedly rising; The prices of medium and heavy rare earths such as dysprosium and terbium are firm and strong, and the prices continue to rise.
Affected by the previous price downturn, the net profit of China Rare Earth and Guangsheng Nonferrous Metals, two rare earth listed companies under China Rare Earth Group, has declined significantly in the whole year of 2023 and the first quarter of 2024.
However, despite the poor performance, Niu San Pan Yingjun has been increasing his position every quarter since becoming one of the top 10 shareholders of China's rare earth outstanding shares for the first time in the fourth quarter of 2022. At the end of the first quarter of 2024, Pan Yingjun has risen from the ninth largest shareholder of China Rare Earth to the fifth largest shareholder of outstanding shares, and the number of shares held has also soared from 2.411 million shares to 7.0193 million shares, an increase of nearly two times.
Moreover, in the fourth quarter of 2023, Pan Yingjun also became the top ten shareholders of Guangsheng Nonferrous Metals for the first time, and slightly increased his position in the first quarter of 2024.
For the medium and long-term market trend of rare earth prices, China Rare Earth Group said at the performance briefing on May 13 that it is full of confidence in the development of rare earths, and the most fundamental reason is that the strategic position and application prospects of rare earths, an important resource, have not changed, the factors supporting the development of the industry have not changed, and the trend of high-quality development of the rare earth industry has not changed.
With the rapid development of new energy vehicles, industrial robots, humanoid robots, wind power, energy-saving motors, energy-saving home appliances and other industries, the demand for rare earths has steadily increased and improved in the long run. At the same time, under the background of China Rare Earth Group's comprehensive completion of the integration of medium and heavy rare earth resources in the mainland, the pattern of the rare earth industry has undergone major changes, and it is expected to usher in further development opportunities.
At the close of trading on June 28, China's rare earth share price closed at 25.35 yuan, with a market value of 26.9 billion yuan, and Guangsheng Nonferrous Metals closed at 27.34 yuan, with a market value of 9.2 billion yuan.
Editor: Captain
Review: Muyu