Interpretation of China Economic Nonferrous Metals Industry Monthly Prosperity Index - Rare Earth Industry Continues to Run at the Bottom
According to the latest monthly boom index of China's nonferrous metal industry, in September 2016, the boom index of China's nonferrous metal industry was 26.1, up 2.3 points from the previous month, and rising to the upper edge of the "cold" region; The leading index of China's nonferrous metals industry was 81.2, up 2.3 points from the previous month; The consensus index was 74.4, a slight increase of 2.1 points over the previous month. It is preliminarily judged that the prosperity index of nonferrous metals industry continues to rise in the "cold" range, but the pressure on the sustained recovery of enterprise economic benefits is still great. From the operation of the rare earth industry in the first three quarters of 2016, the trend is generally consistent with the monthly boom index of the nonferrous metal industry of China Economic Cooperation, showing several basic characteristics such as "the price continues to dip, the supply of rare earth shrinks, and the import and export trade grows".
（1） Prices of major rare earth products continue to dip
In the first three quarters of 2016, the price of rare earth showed a trend of "down up down". Except that the price of major rare earth products rose against the trend from the middle of April to the first ten days of May, stimulated by the good news of commercial reserves, the price of rare earth was in a downward channel for most of the time. In the third quarter, the foreign market entered the traditional summer vacation, with light demand; The bidding for national reserves in the domestic market was not implemented as scheduled, and the price of rare earths lacked the impetus to continue to rise. After losing good support, the price fell, but the decline gradually narrowed. The continuously depressed market has brought great operating pressure to rare earth enterprises. At the end of August, listed rare earth companies have successively released their 2016 semi annual reports. The total operating income of Northern Rare Earth, Minmetals Nonferrous, Guangsheng Nonferrous, Xiamen Tungsten, and NFC has declined to varying degrees year on year, and the net profits of some companies belonging to their parent companies have declined significantly year on year.
From the perspective of representative rare earth products, the average prices of neodymium oxide, dysprosium oxide and terbium oxide in the first three quarters were 256000 yuan/ton, 1255000 yuan/ton and 2592000 yuan/ton respectively, down 6.8%, 18.6% and 22.7% year on year respectively; The price of surplus rare earth elements such as lanthanum oxide, cerium oxide and yttrium oxide dropped by 10% - 30%. Due to the substitution of LED phosphor, the quantity and price of domestic tri color phosphor fell at the same time, and the change of downstream consumption structure also led to a significant year-on-year drop in the price of europium oxide, with a drop of 68% in the first three quarters.
（2） The environmental protection inspection team has settled in the main production area, and the supply of rare earths has shrunk
In order to firmly establish and implement the development concept of innovation, coordination, green, openness and sharing, and ensure that the decisions and arrangements of the Party Central Committee and the State Council take root, in mid July 2016, the Central Environmental Protection Supervision Group respectively stationed in 8 provinces (regions), including Inner Mongolia, Heilongjiang, Jiangsu, Jiangxi, Henan, Guangxi, Yunnan and Ningxia, to carry out environmental protection supervision. Among the provinces (districts) under this supervision, Inner Mongolia, Jiangsu, Jiangxi and Guangxi are all major rare earth producing areas. Some enterprises stopped production for maintenance during the supervision period, prompting the supply of rare earth to shrink, which to some extent helps to repair the supply and demand relationship, improve market expectations, and also makes the price of rare earth rise periodically, but it does not last long. In general, carrying out environmental protection supervision will help the rare earth industry to "look back" on environmental protection issues, promote enterprises to truly implement environmental protection policies, and create a fair and orderly industrial environment for the development of the rare earth industry.
（3） Bilateral substantial growth in import and export trade
From the import and export data, two-way trade in rare earth imports and exports has been active since this year. From January to August 2016, China imported 10700 tons of rare earth smelting and separating products, a year-on-year increase of 46.7%, and exported 31100 tons of smelting and separating products, a year-on-year increase of 53.5%. This shows that: first, the overseas rare earth smelting and separation industry has developed rapidly, and the competitiveness of rare earth salts, oxides and other primary products has gradually emerged; Second, the overseas rare earth application sector has recovered significantly, bringing pressure to China's rare earth deep processing industry. The export of rare earth functional materials continued to maintain a steady and rapid growth, with a cumulative export of 17600 tons of rare earth permanent magnets, up 14.3% year on year.
In terms of trade regions, France's exports of rare earth metals and alloys to China ranked first in the first eight months of this year, accounting for 68.3%; Japan is the largest importer of rare earth metals and alloys and rare earth salts in China, accounting for 53.4% and 31.2% respectively; The United States is the largest importer of rare earth oxides in China, accounting for 39.3%.
（4） Further efforts were made to rectify the order of the industry
First, local governments continued to crack down on rare earth violations. Following the severe crackdown on illegal rare earth mining in Guangdong, Guangxi and other places in the first half of 2016, in September, the Department of Land and Resources of Hainan Province also issued a notice requiring the land departments of all cities and counties in Hainan Province to take the initiative, improve the prevention mechanism, and effectively curb illegal rare earth mining; We should intensify the crackdown, strengthen joint law enforcement, and strictly investigate and punish illegal rare earth mining in accordance with the law. Rare earth mining in violation of laws and regulations has caused serious damage to resources and environment, resulting in unfair competition in the industry and affecting the normal business order of compliant enterprises. It is the only way to promote the healthy development of rare earth industry to intensify the strike and create a fair and orderly market environment.
Second, Jiangxi Province held a rare earth resource recycling enterprise integration meeting. In order to further implement the national strategic goal of rare earth resources and accelerate the integration of rare earth resources in Jiangxi Province, on the afternoon of September 29, 2016, Jiangxi Provincial Commission of Industry and Information Technology held a meeting on the integration of rare earth resource recycling enterprises in Ganzhou. China Southern Rare Earth Group and 41 relevant enterprises in the province that have not joined the major rare earth groups attended the meeting. The participants discussed the Integration Cooperation Agreement (Discussion Draft) in depth, and Jiangxi Provincial Commission of Industry and Information Technology said that it would carefully study and sort out the opinions of all parties and determine the integration plan as soon as possible. The integration of rare earth resources comprehensive recovery enterprises will help to establish a "full coverage" management mechanism and further standardize the order of rare earth industry.
（5） Green Development Expands New Space for Rare Earth Consumption
First, new energy vehicles. The motor system of new energy vehicles mainly includes DC motor, AC asynchronous motor, permanent magnet synchronous motor and wheel motor. At present, except Tesla adopts AC asynchronous motor, new energy vehicles at home and abroad mainly use permanent magnet synchronous motor. From January to September this year, the output of new energy steam in China was 302000 units, and the sales volume was 289000 units, with year-on-year growth of 93.0% and 100.6% respectively. Among them, the production and sales of pure electric vehicles were 229000 and 216000, up 118.1% and 128.4% year on year respectively; The production and sales of plug-in hybrid vehicles were 73,000, up 41.7% and 47.2% year on year respectively. The rapid development of new energy vehicle industry will drive the synchronous increase in the application of permanent magnet synchronous motor.
Second, wind power. The 13th Five Year Plan outlines the need to promote the revolution in energy consumption, supply, technology and system. By 2020, the proportion of non fossil energy in primary energy consumption will reach 15%. In this context, wind power is expected to usher in new opportunities for development. The wind power direct drive motor using rare-earth permanent magnet NdFeB material does not need excitation winding, and has many advantages such as low maintenance cost, high operation efficiency (more than 20% higher than the doubly fed generator). The rapid development of wind power industry will drive the demand for rare earth permanent magnet materials.
（6） Research and judgment on the development of rare earth industry in the fourth quarter
From the supply side, although the relevant national departments have taken a series of measures, the problems troubling the rare earth industry have not been fundamentally solved. From the demand side, the performance of traditional fields is weak. Some fields (such as the tri color phosphor industry) have also shrunk significantly. Although emerging fields have developed rapidly, the growth is limited. Therefore, on the whole, there is no significant growth in downstream consumer demand, which will remain relatively stable. After entering the fourth quarter, with the end of summer vacation in the western market, foreign users will reserve stocks and rare earth prices are expected to rise periodically. However, limited by the fundamentals of oversupply, the upside is limited.