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    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Update Time : 2021-11-05 View : 1269

    Ye Tan Finance

    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    On October 20, Peng Huagang, spokesman of the state owned assets supervision and Administration Commission of the State Council, said that in the next step, we will combine the implementation of the relevant requirements of the opinions on promoting the layout optimization and structural adjustment of the state-owned economy in the new era with the three-year action of implementing the reform of state-owned enterprises, vigorously promote the professional integration in rare earth, logistics and other fields, and effectively enhance the competitiveness of enterprises through the optimal allocation of resources, Build a world-class enterprise with global competitiveness.
    This undoubtedly further promoted the strategic reorganization of China's rare earth group. The reorganization of rare earth assets will solve the vicious competition among rare earth mining enterprises to a certain extent. On the other hand, it is also more conducive to concentrate resources and enhance the voice of China's rare earths in the international market.
    Affected by this news, the rare earth sector rose sharply today. Northern rare earth (600111. SH) and Minmetals rare earth (000831. SZ) all rose by more than 7%, and Guangsheng nonferrous metals (600259. SH) and Shenghe resources (600392. SH) also rose one after another.
    In fact, on September 23, Minmetals rare earth received a notice from China Minmetals Group Co., Ltd. that Chinalco, China Minmetals Group Co., Ltd. and Ganzhou Municipal People's government are planning the strategic reorganization of relevant rare earth assets, which also means that the reorganization of rare earth group officially kicked off.
    For the strategic restructuring of rare earth group, we believe that the concentration of the industry will be further improved, the voice of leading enterprises will continue to improve, and the industry is expected to usher in value revaluation.
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Supply and demand double vibration, rare earth prices rising
    As the saying goes, "there is oil in the Middle East and rare earth in China", rare earth is widely used for civil and military purposes. At the same time, it is also an indispensable raw material for high-tech industries such as advanced equipment manufacturing, new energy and emerging industries. It is a valuable and key strategic resource. China has obvious advantages in the rare earth industry chain. About 80% of the global rare earth production and Nd-Fe-B production are concentrated in China.
    The rare earth industry chain is mainly composed of the exploitation of rare earth resources in the upstream, the preparation of rare earth materials in the midstream and the application fields in the downstream.
    The upstream mainly includes the raw ore mining and beneficiation process. After mining, rare earth concentrate is processed through flotation, gravity separation, magnetic separation and other beneficiation processes.
    In the middle reaches, the rare earth concentrate is mainly formed into rare earth compounds or single rare earth metals through pyrometallurgical technology or hydrometallurgy technology, and then processed into various rare earth materials, such as rare earth catalytic materials, rare earth permanent magnetic materials, rare earth hydrogen storage materials, rare earth luminescent materials, etc.
    Downstream permanent magnet materials, petrochemical industry and ceramic glass are the main application fields of rare earth.
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Figure 1: rare earth industry chain
    Since this year, the demand for rare earth has increased significantly thanks to the strong demand in downstream application fields (new energy, wind energy, variable frequency air conditioning, etc.).
    From the supply side, on January 15, 2021, the Ministry of industry and information technology issued the regulations on rare earth management (Draft for comments), specifying that the total amount of rare earth may continue to be controlled in China. In order to protect the environment and rare earth strategic resources, the measures of "annual mandatory plan" are implemented for rare earth mining and separation in China.
    In addition, the regulations on the administration of rare earth will be issued soon. Strict supply control is still the main theme of the policy, and the rigid role of supply is beginning to appear. The resonance between the supply side and the demand side and the superposition of national policy support resulted in a significant increase in rare earth prices during the year.
    In terms of light rare earths, the price of praseodymium oxide increased by 90.07%, and the price of neodymium oxide increased by 29.29%; In terms of heavy rare earths, the price of dysprosium oxide increased by 41.24%, and the price of terbium oxide increased by 22.45%.
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Figure 2: rare earth price trend since the beginning of the year
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Logic of long-term growth of rare earth demand driven by green power of new energy vehicles
    Looking back, several increases in rare earth prices in China are driven by short-term policies.
    From 2010 to 2011, China put forward the formal opinion of "national implementation of rare earth strategic reserve" for the first time, which led to a significant reduction in supply and a sharp rise in rare earth prices.
    From 2013 to 2014, the Ministry of industry and information technology carried out the special action of "rare earth anti Mafia" to control the output of black rare earth, which led to the recovery of rare earth prices.
    From 2017 to 2018, three rounds of national reserve bidding, and the collection and storage price gradually increased.
    This round of rare earth price rise is different from the past. The main driving force has changed from policy driven to demand driven, so it has more logic of long-term growth.
    As mentioned above, in the downstream application field of rare earth, permanent magnet materials account for the largest proportion in rare earth products, and Nd-Fe-B permanent magnet is the core. The application fields of high-performance Nd-Fe-B cover traditional and new energy vehicles, power generation, electronic equipment, air conditioning and household appliances. Among them, automobiles are the largest downstream, accounting for about half, and are mainly used to manufacture permanent magnet motors.
    Since this year, the production and sales of new energy vehicles have continued to set new records. According to the data of China Automobile Industry Association, from January to August, the production and sales of new energy vehicles were 1813000 and 1799000 respectively, an increase of 1.9 times year-on-year, and the penetration rate of cumulative sales was close to 11%.
    The strong demand in the downstream also led to a sharp rise in the demand for rare earths. The new energy vehicle industry development plan (2021-2035) proposes that the penetration rate of new energy vehicles will reach 20% by 2025, and the incremental space of new energy vehicles will continue to drive the increase of demand for rare earths.
    In addition, if the permanent magnet direct drive of wind power and industrial motors under the endogenous demand of "double carbon" is included, "green power" will occupy an absolutely dominant position and the sustainability of rare earth growth will be supported.
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Figure 3: 2025e high performance magnetic material consumption structure
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Rare earth group's strategic restructuring value or revaluation
    At present, China's rare earth industry has formed a "1 + 5" pattern of five rare earth companies in the north and the south, and the domestic rare earth resources are in the hands of the existing six rare earth groups.
    On September 23, Minmetals rare earth received a notice from China Minmetals Group Co., Ltd. that Chinalco, China Minmetals Group Co., Ltd. and Ganzhou Municipal People's government are planning the strategic reorganization of relevant rare earth assets. The relevant plans have not been finalized and need to be approved by relevant competent departments.
    Minmetals rare earth and Chinalco are one of the six rare earth groups in China's rare earth industry. The other four rare earth groups are North rare earth, Xiamen tungsten industry, South China rare earth and Guangdong rare earth group.
    SASAC shot! Important resources attracting global attention usher in a great opportunity for value revaluation
    Figure 4: overview of China's six rare earth groups
    On October 20, Peng Huagang, spokesman of the state owned assets supervision and Administration Commission of the State Council, said that in the next step, we will combine the implementation of the relevant requirements of the opinions on promoting the layout optimization and structural adjustment of the state-owned economy in the new era with the three-year action of implementing the reform of state-owned enterprises, vigorously promote the professional integration in rare earth, logistics and other fields, and effectively enhance the competitiveness of enterprises through the optimal allocation of resources, Build a world-class enterprise with global competitiveness.
    If the reorganization of Minmetals rare earth and Chinalco group is completed, a senior rare earth group will be formed, or the pattern of domestic rare earth industry will be further changed, the concentration of domestic rare earth industry will be improved, and the voice of leading enterprises will be further improved.
    On the whole, under the background of strict policy control of rare earth supply. On the one hand, the industry supply may continue to shrink; On the other hand, with the continuous development of new energy vehicles, green industries and other industries, downstream demand will continue to release, and the long-term growth logic of rare earth industry will be supported. In addition, the strategic restructuring of rare earth group will also promote the upward movement of the value center of the industrial chain, and the value is expected to be revalued.
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