The Strategic Value of Rare Earth Appears

Rare earth is the general term for 17 metal elements. As early as the end of the 18th century, there were many studies on rare earths abroad. It was not until the middle of the last century that scholars in the industry completed the entire development history of the 17 rare earth elements. Scientists agree that rare earths will make outstanding contributions to the six new technological fields of the 21st century.

Revisiting Rare Earths

China is one of the countries with rich rare earth resources. With the improvement of the social system and the economic level, a relatively complete rare earth supply system has been established, the market environment has gradually improved, and the overall industry environment is stable. However, in the past two months, the price of rare earths has continued to rise. The three major rare earths-terbium oxide, dysprosium oxide, and praseodymium neodymium oxide have risen by 64%, 32%, and 34%. The rare earth industry is keenly concerned again. The changes in the industry make it necessary for us to further deepen our understanding of rare earths and revisit rare earths at a new time node.

Downstream Demand Structure

The application range of rare earths is very wide. In the demand structure, permanent magnet materials account for 42%, followed by metallurgical machinery, accounting for 12%. Driven by downstream sectors such as new energy vehicles and wind power, the industry's prosperity is highly certain.

New Energy Vehicles Promote Continued High Demand for Rare Earths

New energy vehicles promote the continued increase in demand for rare earths. Currently, the global production and sales of new energy vehicles have reached 4 to 5 million. Assuming that the global sales of new energy vehicles from 2021 to 2022 are 4.5 million and 6 million, the demand for new energy vehicles has already accounted for about 7% of the total demand for NdFeB and the demand for high-performance products exceeds 16%. Although the content of NdFeB in bicycles is only one-tenth of the content of lithium carbonate, the promotion of new energy vehicles to the rare earth industry cannot be underestimated.

Wireless Magnetic Charging Technology Brings New Increase in Rare Earths

Apple adds new highlights. The iPhone 12 released last year introduced a new wireless charging solution, namely wireless magnetic charging technology based on the MAGSAFE magnetic system. The back of the iPhone 12 is equipped with a magnetic ring made of neodymium iron boron permanent magnets. Although the current market is still dominated by wired charging, as wireless charging technology continues to mature in the future, wireless charging will be the best option in the era of fragmentation. Assuming that the sales volume of Apple mobile phones in 2021 is 200 million and the penetration rate of MAGSAFE is 10%, the demand for NdFeB can reach 600 tons and the demand for NdPr is 202 tons.

Overseas Minerals at Peak, International Supply Pattern Will Be Reshaped

From the perspective of resource distribution, the global rare earth resources are relatively concentrated, mainly in China, Vietnam, Brazil, and Russia. Data show that the total global rare earth resources are 120 million tons, of which China has 44 million tons; both Vietnam and Brazil have proven reserves of 22 million tons; Russia has proven reserves of 12 million tons; India has proven reserves of 6.9 million tons.

In terms of output distribution, China is the largest country which accounts for more than half of the world's output of rare earths. In 2019, the global output of rare earth mines was 210,000 tons, of which China's output accounted for 63%, followed by the United States, Myanmar, and Australia, which accounted for 12%, 11%, and 10% respectively.

Overseas, the mineral output of the top-ranked countries will reach their peak. The large-scale mining of rare earth mines in Myanmar has led to the continuous reduction of high-quality resources. Miners have to choose other mining areas as their alternatives, which makes the quality and quantity of rare earth mines produced in Myanmar different from the past. The current production capacity of Mountain Pass, a major US mine, has reached full capacity, and there is no short-term mine expansion plan. It can be seen that large-scale overseas production capacity is limited, and the global rare earth supply pattern is about to be reshaped.

The Black Industry Chain Withdrew from The Stage of History, And the Domestic Supply Pattern Changed

In China, the planned output of rare earths belonging to the gray edge has always accounted for a large proportion. Since 2016, the black industry chain has gradually withdrawn from the stage of history due to a series of measures such as the continuous crackdown on gangsters, environmental rectification, and integration of the six major groups. Out of the need to maintain national interests and industrial safety and to regulate the development environment of the rare earth industry by the law, legislation on the management of the rare earth industry has been put on the agenda.

The Prosperity of the Rare Earth Industry Has Improved Significantly in the Short Term,

Affected by global public health events, various industries have been impacted to varying degrees. However, under the normalization of epidemic prevention and control in China, enterprises resumed production and social and economic growth is back on track. Driven by the rebound in macro demand, new energy vehicles, and wind power, the rare earth industry has quickly recovered. However, due to the small variety of some rare earths, long-term orders and futures orders were mainly used in the past. After the industry shutdown, the sudden surge in market demand seems to be insufficiently motivated, and the tight supply and demand in the spot market has led to an increase in rare earth prices. Besides, due to the non-renewable nature of rare earths, China implements a quota system and quantitative supply of rare earth resources, which will set off a new round of price increases, more durable and stable. It is good for the sustainable and healthy development of the rare earth industry.

Science and technology are the key competition points of all countries in the world, and rare earth is an important element of various functional materials in the high-tech field, which has been given a high strategic position. In recent years, many economies such as Europe, America, and Japan have successively introduced policies to include rare earths in their national strategic resource reserves. China leads the world in rare earth reserves, output, export volume, and consumption, and has the most complete rare earth industry chain in the world. In recent years, structural reforms on the supply side of the domestic rare earth industry have made progress. Downstream magnetic materials, catalysis, and hydrogen storage applications are developing rapidly, and the supply-demand relationship is expected to maintain stable and good fundamentals. Under the new pattern, the strategic value of rare earth resources is expected to continue to increase.

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