Key investment points
As China's dominant small metal, rare earth has made a deep impression on investors. In the past five years, most of the commodity prices and the secondary market have impulse market, and the investment experience is not very good. However, the past cognition can not explain the current price trend of rare earth. Since March 2020, the price of praseodymium oxide and neodymium oxide has increased by 71% from 268000 yuan / ton to 458000 yuan / ton, which exceeds the level of the past five years in both time and range. Especially, the price of 20q4 and lithium cobalt has increased at the same time. What changes have taken place in the industry? At the present time, we think it is very necessary to reshape our understanding of rare earth and re-examine the rare earth "from quantitative change to qualitative change" from a new perspective. This is also our third rare earth analysis report since November 20: three qualitative changes of rare earth in the past 20 years
1. Qualitative change 1: new energy vehicles bring continuous demand for rare earth: as an increasingly irreplaceable magnetic material, rare earth permanent magnet is widely used in various fields of production and life, but the "industrial monosodium glutamate" attribute makes it "less unit consumption and scattered application", and the focus does not seem to be prominent - take new energy vehicles as an example, the unit consumption is 3-kg / vehicle, which is 1 / 10 (35-50kg, 50kwh) of lithium carbonate/ Vehicle calculation). However, the current global production and sales of new energy vehicles have reached the threshold of 4-5 million, which is 8-10 times of that in 15 years. According to our calculation, the demand for new energy vehicles has accounted for 7-8% of the total demand for NdFeB, 15% of the demand for high-performance products, and about 30% of the incremental demand. This is similar to the impact of new energy vehicles on lithium carbonate in 2015, and the demand pull of new energy vehicles can not be ignored.
2. Qualitative change 2: the black industrial chain has faded out of history, and the supply side has been reshaped: Historically, the output of non-state production mandatory plan has always accounted for a large proportion, so there have been continuous "rare earth blackout" actions over the years. However, after 2015, with a series of measures such as "continuous crackdown on illegal activities, environmental rectification, and integration of six major groups", the black industry chain has faded out of the historical stage, and now a "622" supply pattern of domestic and overseas mines and wastes has been formed. In the future, domestic mines will continue to implement total amount index control; overseas mines, Lynas and MT pass are in full production state, and there is no clear capital expenditure in the medium term. After nearly five years of rapid mining, Myanmar mines' production capacity will also peak; supply side remodeling is completed.
3. Qualitative change 3: completion of destocking: since the beginning of 20 years, the supply of rare earth has exceeded the demand, but the annual price rise is not significant, but the core lies in the inventory pressure. According to Baichuan data, in 2020, the inventory of praseodymium oxide and neodymium oxide manufacturers will rapidly drop from 10000 tons to around 3000-4000 tons, and the inventory will be reduced by 70%.
4. In general, driven by the demand for new energy, the supply of praseodymium oxide and neodymium oxide is in short supply from 2020 to 2022: it is estimated that the shortage of praseodymium oxide and neodymium oxide will be 3000-5000 tons in 21 years, and the gap is about 5-6%. If the demand for replenishment is included, the apparent gap may reach more than 10%.
5. Investment suggestion: driven by electricity economy, especially new energy vehicles, the demand for high-performance NdFeB magnetic materials is growing rapidly, while the supply side is relatively rigid. It is expected that the supply of rare earth (praseodymium oxide and neodymium oxide) will fall short of demand in 2020-2022, and the prosperity of the industry will continue to improve. The supply of NdFeB will also encounter bottlenecks, which will also benefit from the rising price of rare earth. More importantly, the attribute of rare earth industry chain will shift from the high fluctuation brought by the supply side to the sustained high growth driven by the demand side. It's time to reshape the understanding of rare earth. Reiterated the small metal rare earth plate "overweight" rating. Industry chain target: 1) rare earth resources: Northern rare earth (16.320, - 1.74, - 9.63%), Shenghe resources (16.990, - 1.89, - 10.01%), etc.; 2) rare earth permanent magnet: Zhenghai magnetic material (11.270, - 1.22, - 9.77%), Jinli permanent magnet (31.720, - 2.96, - 8.54%), etc.
6. Risk tips: domestic rare earth policy, such as the change risk of production mandatory plan, overseas rare earth supply exceeding expectations, downstream demand less than expected, industry scale calculation based on certain assumptions, there is a risk of less than expected, and the public information used in the research report is not updated in time.
7. For recent reports, please refer to:
Rare earth, or will continue to implement total control 20210118
Zhenghai magnetic: high performance NdFeB production capacity continues to expand, maintaining "buy" rating 20201228
Rare earth: what's the difference between the current upward cycle and the previous one? twenty million two hundred and one thousand one hundred and twenty-seven
Historical review: Policy fade out, supply and demand fundamentals become the dominant factor
Looking back on the history, rare earth has experienced three obvious upward cycles: 1) from October 2010 to July 2011, the financial crisis reversed the cycle to adjust and raise the total demand. At the same time, China cracked down on the black industry chain of rare earth, implemented the export quota system, and the social hoarding behavior promoted the price of rare earth to soar. The price of praseodymium oxide and neodymium oxide increased from 200000 yuan / ton to 1249000 yuan / ton, up to 518000 yuan / ton %The price of dysprosium oxide increased by 916% from 139.25 to 13.7925 million yuan / ton; 2) from May 2017 to September 2017, after several special actions of storage, environmental rectification and rare earth blackout, the effect of the policy on the supply side was initially apparent, and the price of rare earth rose under the rebound of demand, but without sustained demand pull, the price would reach the starting point, or even hit a new low; 3) from May 2019 to 2019 In June 2003, Myanmar banned the export of rare earth minerals, adding to the tension between China and the United States, the price of praseodymium oxide and neodymium oxide increased by 39% from 264500 yuan / ton to 367500 yuan / ton. It can be seen that the three rounds of market history seem to be inseparable from the control of the supply side.
However, the past cognition can not explain the current price trend of rare earth. Since March 2020, the price of praseodymium oxide and neodymium oxide has increased by 71% from 268000 yuan / ton to 458500 yuan / ton, both in time span and range, exceeding the level of the past five years. Especially, the price of 20q4 and lithium cobalt has accelerated up at the same time. What changes have taken place in the industry? At the present time, we think it is very necessary to reshape the understanding of rare earth and re-examine the rare earth from quantitative change to qualitative change from a new perspective.
Qualitative change 1: new energy vehicles bring continuous demand for rare earth
As "industrial monosodium glutamate", rare earth is widely used in downstream areas. Rare earth, as "industrial monosodium glutamate", is widely used in various fields of production and life. Its "low unit consumption and scattered application" does not seem to be the focus. Take new energy vehicles as an example, the unit consumption of NdFeB is 3kg / vehicle, which is 1 / 10 of that of lithium carbonate (35-50kg, 50kwh / vehicle).
The demand for rare earth (NdFeB) brought by new energy vehicles continues to increase: at present, the global production and sales of new energy vehicles have reached the threshold of 4-5 million, which is 8-10 times of that in 15 years; considering that the global sales of new energy vehicles continue to exceed expectations since November 2020, we increase the sales assumption of new energy vehicles, assuming that the global sales of new energy vehicles in 2021-2022 are respectively 452g6160000 (previous score) According to our calculation, the demand for new energy vehicles has accounted for 7-8% of the total demand for NdFeB, 15% of the demand for high-performance products, and about 30% of the demand increment. This is similar to the impact of new energy vehicles on lithium carbonate in 2015, and the demand pull of new energy vehicles can not be ignored.
Qualitative change 2: black industrial chain fade out of history, supply side remodeling completed
The global supply of rare earth resources is relatively concentrated
According to USGS data, the total amount of rare earth resources in the world is 120 million tons, including 44 million tons in China, accounting for 37%; 22 million tons in Vietnam and Brazil, accounting for 18%; 12 million tons in Russia, accounting for 10%; and 6.9 million tons in India, accounting for 6%. The distribution of resources and reserves is relatively concentrated, with Cr5 accounting for 90%. From the perspective of output distribution, the global rare earth mineral output in 2019 is 210000 tons, of which China is the largest rare earth producer, accounting for 63%, and the output of the United States, Myanmar and Australia account for 12%, 11% and 10% respectively.
Historically, the output of non-state production mandatory plan has always accounted for a large proportion, so there have been continuous "rare earth blackout" actions over the years. However, after 2015, with a series of measures such as "continuous crackdown on illegal activities, environmental rectification, and integration of six major groups", the black industry chain has faded out of the historical stage, and now a "622" supply pattern of domestic and overseas mines and wastes has been formed.
Domestic mines: continue to implement total index control, lack of elasticity in supply
Our country implements the total quantity target control, the supply is relatively rigid. In 2011, the State Council issued several opinions of the State Council on promoting the sustainable and healthy development of the rare earth industry, and then the Ministry of industry and information technology proposed the plan of establishing "1 + 5" national large rare earth groups. At the end of 2014, the implementation plans of establishing the six groups of rare earth groups were approved, and the resource control degree of the six groups was close to 100%. On January 15, 2021, the Ministry of industry and information technology issued the "rare earth management regulations (Draft)", which made it clear that no unit or individual should invest in the construction of rare earth mining, rare earth smelting and separation projects without approval, and established a general tone for the subsequent domestic rare earth mining and separation, that is, to continue to implement the total amount index control.
The domestic rare earth index increased in an orderly way, with an average annual growth of about 10000 tons of REO during the 13th Five Year Plan period. Historically, during the "12th Five Year Plan" period, the domestic rare earth industry is facing the problem of overcapacity, and the indicators have little growth. During the "13th five year plan" period, the domestic rare earth indicators are gradually liberalized, but the overall growth is relatively orderly. The growth of smelting indicators and rare earth mining indicators are about 10000 tons of REO / year.
Environmental supervision is becoming stricter, and the black industry chain is constantly being hit. Since 2012, a large number of rare earth black industrial chains have entered the market, leading to the continuous decline of prices, resulting in environmental pollution and waste of resources. In December 2016, eight ministries and commissions launched special actions to crack down on the black industry chain of rare earth, and Jiangxi Province strictly controlled the mining, smelting, recycling and other links of the industry chain of rare earth. In 2019, 12 ministries and commissions, including the Ministry of industry and information technology, issued the notice on continuously strengthening the rectification of the order of the rare earth industry, established a multi department joint supervision mechanism for the first time, and carried out special supervision once a year to deal with violations of laws and regulations The regulation on rare earth management (Draft for comments) has made clear the policy basis, and the rare earth products and illegal income will be confiscated and the fine of more than one time and less than five times of the illegal income will be imposed, which means that the rectification of rare earth has officially entered normalization. According to our calculation, the proportion of rare earth black industry chain is less than 3%.
Overseas mine: Myanmar mine capacity cycle peaked, Lynas & MT pass mine full load operation
Myanmar's mining capacity cycle peaked: in recent years, with the large-scale mining of Myanmar's rare earth mines, the supply of high-quality resources has been decreasing. The reduction of mining resources makes the miners choose other areas for mining, and they have to face the impact of factors such as grade decline. Myanmar's mining output may gradually decline.
U.S. mines: mountain pass is the main mine in production in the United States at present, with total resources of 2.07 million tons (REO), average grade of 6.57%, reserves of 1.3 million tons, average grade of 7.98%. It started to resume production in January 2018, with a design annual capacity of 40000 tons REO, which is mainly sold to China through Shenghe resources. At present, the production capacity has climbed to the full production stage, and there is no plan to expand production in the short term.
Australian mine: Mount Weld mine of Lynas is an associated deposit of rare earth, niobium, tantalum and phosphorus. The mine was put into operation in 2013 with an initial production capacity of 11000 tons (REO) / year, and then increased to 25000 tons (REO) / year. At present, the utilization rate of production capacity is about 75%. There is no plan to continue to expand production in the short term, and the increase of production capacity is relatively limited.
Qualitative change 3: inventory elimination completed
Domestic manufacturers of praseodymium oxide and neodymium oxide stocks continue to be depleted. Since the beginning of 20 years, the supply of rare earth has exceeded the demand, but the annual price rise is not significant, but the core is the inventory pressure. In 2020, the domestic praseodymium oxide and neodymium oxide inventory will gradually be reduced from 11025 tons at the beginning of 2020 to 4155 tons. At present, there are few spot sales in the market, and most downstream enterprises lock in raw materials through futures orders. It needs to be emphasized that the continuous price rise and inventory elimination since the second quarter of 2020 have little to do with the supply side (the domestic production of praseodymium oxide and neodymium oxide in 2020 is 57250 tons, a year-on-year increase of 13%), which is more driven by the continuous high growth of the demand side.
Praseodymium and neodymium oxide in short supply in 2020-2022
As in "rare earth: what's the difference in the current upward cycle?"? 》From the demand side, new energy vehicles and other fields will drive high-performance NdFeB demand growth. It is estimated that the global NdFeB demand in 2020-2022 will be 247900 tons and 266300 tons respectively, and the demand for praseodymium neodymium oxide will be 79300 tons and 85800 tons respectively, with year-on-year growth rates of 11% and 8% respectively. From the supply side, assuming that the domestic production mandatory plan increases by 20000 tons per year, the supply of praseodymium oxide and neodymium oxide 2021-2022 will be 74200 tons and 78200 tons respectively, with a year-on-year growth rate of 12% and 5% respectively, and the supply and demand gap will be 5086 tons and 7609 tons respectively. Considering the demand for replenishment in the industrial chain, the supply and demand shortage ratio will reach more than 10%.
Investment suggestion: restate the "overweight" rating of small metal rare earth plate
Investment suggestion: driven by electricity economy, especially new energy vehicles, the demand for high-performance NdFeB magnetic materials is growing rapidly, while the supply side is relatively rigid. It is expected that the supply of rare earth (praseodymium oxide and neodymium oxide) will fall short of demand in 2020-2022, and the prosperity of the industry will continue to improve. The supply of NdFeB will also encounter bottlenecks, which will also benefit from the rising price of rare earth. More importantly, the attribute of rare earth industry chain will shift from the high fluctuation brought by the supply side to the sustained high growth driven by the demand side. It's time to reshape the understanding of rare earth. Reiterated the small metal rare earth plate "overweight" rating. Industry chain target: 1) rare earth resources: Northern rare earth, Shenghe resources, etc.; 2) rare earth permanent magnet: Zhenghai magnetic material, Jinli permanent magnet, etc.
North rare earth: the leader of light rare earth in the world
The company is a leading light rare earth enterprise in the world. The company has formed an industrial structure based on the development and utilization of Bayan Obo rare earth deposits, with smelting separation as the core, new material field construction as the focus, and terminal application as the expansion direction. The company is mainly engaged in the development and utilization of Bayan Obo rare earth mineral. Bayan Obo mine is the largest rare earth, iron, niobium, thorium and other polymetallic complex intergrowth mine in China. At present, the proven rare earth resource is about 100 million tons, with an average rare earth oxide (REO) content of 3% ~ 5%, accounting for about 38% of the world's reserves. The mining right of Bayan Obo mine and the rare earth franchise in Inner Mongolia are owned by the controlling shareholder Baotou Steel Group and its subsidiary Baotou Steel (1.130, - 0.04, - 3.42%).
At present, the company's smelting and separation capacity is 80000 T / A, rare earth metal capacity is 10000 t / A, and rare earth raw material capacity ranks first in the world; among rare earth functional materials, magnetic material alloy capacity is 30000 T / A, ranking first in the world; polishing material capacity is 14000 T / A, hydrogen storage alloy capacity is 3000 t / A, and luminous material capacity is 1000 t / A.
Shenghe resources: increase the distribution of overseas rare earth resources