Huatai securities: 2025 rare earth industry or to boom inflection point tightening supply and demand to push up prices

1) Industry or to boom inflection point in 2025, pay attention to the value of plate configuration

According to SMM, Myanmar supply is still not restored, the local demand for 20% resource tax increase so that the cost of miners increased significantly, miners said it is difficult to accept, China's imports of rare earths from Myanmar in 2024 decreased significantly. Domestic control of rare earths is more complete and stronger, the “Rare Earth Management Measures” intends to include all sources of rare earth mines, such as domestic mines, imported mines and monazite, into the management system. Assuming that the supply reduction in Myanmar in 2025 and the basic recovery in 2026 + the continuation of the lower growth rate of the domestic quota, the global praseodymium-praseodymium oxide supply/demand balance/neodymium demand in 2025-2026 is estimated to be -5.8%/-4.6% respectively. 2025 the industry or to the inflection point of the boom, the improvement of supply and demand or to promote the price of the strong shock, the risk is that the growth rate of the domestic quota is significantly more than expected. In addition, tariff disturbances continue, rare earths as a counter tariff disturbances in the export of alternative varieties, its strategic position is self-evident, pay attention to the value of plate configuration.

2) Myanmar supply is not restored as expected, China's imports of rare earths from Myanmar in 2024 is significantly reduced

According to SMM, since October 18, 2024, the China-Myanmar border gate in Kachin State has been closed due to clashes between the Kachin Independence Organization (KIO)/Kachin Independence Army (KIA) and the government forces, and since November 8, 2024, news of ceasefire negotiation between the KIA and the government has been circulating, and the Chinese side has also indicated that it would reopen the border crossing on November 15 immediately afterwards. However, Myanmar did not resume as expected, mainly due to the local demand for a 20% increase in resource tax which increased the cost of miners significantly and miners said it was difficult to accept. As of now, Myanmar's supply has still not recovered, and SMM said miners believe it will be difficult to recover in the short term. According to the General Administration of Customs, China imported 34,500 tons of rare earth oxides from Myanmar in 2024, a year-on-year decline of 17.3%, accounting for 69.5% of the total imports of oxides in the same period; during the same period, China imported 9,900 tons of rare earth compounds from Myanmar, a year-on-year decline of 67%, accounting for 36.4%.

3）Fuller and stronger domestic control over rare earths

On February 19, 2025, the Department of Raw Material Industry of the Ministry of Industry and Information Technology (MIIT) drafted the “Measures for the Administration of the Total Regulation of Rare Earth Mining and Rare Earth Smelting and Separation (Interim) (Public Consultation Draft)” (hereinafter referred to as the “Measures for the Administration of Rare Earth”) “Measures for the Administration of Rare-Earth Product Information Traceability (Interim) (Public Consultation Draft)” (see the Annex), and the “Rare Earth Administration Regulations” pointed out that rare earth minerals include the domestic extraction of The “Rare Earth Management Regulations” pointed out that rare earth mineral products include domestic mining and processing of rare earth mineral products, rare earth mineral products imported from abroad, monazite concentrates and other rare earth minerals through other rare earth minerals by-products of rare earth mineral products, as well as other types of rare earth mineral products, etc., i.e., all sources of rare earth minerals will be included in the management and control, which means that the domestic supply of rare earths to the control of the more complete and stronger.

4）Supply and demand is likely to improve, 2025 rare earths or to the boom inflection point

The third quarter of 2024 rare earth prices have been close to some high-cost mine cost line, the bottom of the industry boom was established. 2024 cumulative mining and smelting indicators were +5.88% / +4.16% year-on-year, the growth rate of the year-on-year decline of 15.5 % / 16.6%, the domestic supply tightened significantly. Domestic quota growth rate decline superimposed on overseas supply disturbances, the global rare earth supply side of the growth rate contraction trend has been apparent, and humanoid robots as a representative of the emerging field gradually open the future demand for rare earth growth space. Assuming that the supply of Myanmar will decrease in 2025, but basically recover in 2026, and the domestic quota will continue to grow at a lower rate, the global praseodymium-neodymium oxide supply/demand balance/need in 2025-2026 will be -5.8%/-4.6%, respectively; the probability of supply/demand relationship will improve, and the industry will reach the inflection point of the boom in 2025. The risk is that if the domestic quota growth rate exceeds the expectation, the price may return to the weak.

5）Rare earths strategic position is self-evident, pay attention to the value of plate configuration

According to Huatai Macro's “How to Understand Trump's ‘Reciprocal Tariffs’? (2025.02.10), based on the underlying logic of Trump's tariffs is “America First” - i.e., to promote trade balance/manufacturing repatriation and fiscal balance, so it may still need to impose tariffs on a larger scale globally. If the tariffs will eventually be implemented, according to the USGS, in 2024, China's raw rare earth supply chain accounted for about 69%, rare earths as a counter to tariffs disturbances in the export of alternative varieties, its strategic position is self-evident, pay attention to the value of the plate configuration.