Rare good come again and again to the situation improves

First, the product prices bottomed out, expected future gains or super-

(A) two rare earth prices fell nearly 9 percent, bottoming out

Rare earth prices since July 2011 high of nearly 90 percent decline has been so far, in addition to other varieties outside neodymium praseodymium prices hit 2010 lows, but considering the resources tax and environmental investment has doubled the cost of production, so prices have been rare its cost line support, there is a strong oversold bounce their power.

Since 2013, dysprosium, terbium, europium and other varieties of heavy rare earth greater decline, has been seriously underestimated the value of their resources, so the recent price first bottoming out, months or exceeded 4 percent, praseodymium neodymium follow up but the increase is relatively small .

(Two) the heavy rare earth upside large-than-expected future price increase or

Since the rare earth prices rebounded since the heavy rare earth elements rose significantly higher LREE; But we think the heavy rare earth elements because of its scarcity of resources and application characteristics, the future has a greater upside. We dysprosium, terbium, europium rich in yttrium europium oxide ore output in proportion to measure, now the index is only 42.59%, relatively low in history, which shows the heavy REE prices are still relatively low, so we that the proportion will increase to at least 50%, the future is still a large room for improvement, the heavy rare earth prices will continue to rise.

Currently dysprosium, terbium, europium output ratio from historic lows has increased by 5 percentage points, assuming that other elements of the same price, dysprosium, terbium, europium proportion increased to 50% of the production value, the price still rose more than 40% (from the bottom or double). Recent price rises have been pre-earth neodymium, praseodymium, dysprosium, terbium, europium spread to samarium, gadolinium and other species, we believe that the dividend policy until late after landing, all kinds of rare earth prices will rise in full recovery, the future of heavy Rare earth prices rose or exceeded our expectations.

Second, the downstream demand bottomed out, substantial growth in exports

(A) downstream demand bottomed out, consumption growth from negative to positive

2011, rare earth prices skyrocketing demand makes the downstream part of the transfer, the resulting year China's rare earth consumption fell 4.5%. 2012, China's annual consumption of 89,100 tons of rare earth, an increase of 7.2%, consumption growth from negative to positive, the downstream demand bottomed out.

(Two) permanent magnet driven recovery in demand, exports up sharply increased

Downstream applications of rare earth permanent magnets are mainly distributed in the battery, metallurgy, automobile catalysts, FCC catalyst, polishing powder, glass additives, phosphors and ceramics nine areas, which in our consumption of rare earth permanent magnet in the proportion of 42%, proportion of downstream demand is the largest industry. 2013 second quarter, NdFeB enterprises operating rate from 50% to 80%, rare earth permanent magnet industry, signs of obvious. Consumption of rare earth permanent magnet to pick up, driven by signs of recovery in 2013 from January to May, China's total export volume of rare earth substantial growth of 87%.

In addition, rare earth prominent features, some of the emerging field of application has been or is about to enter the industry, such as LED lamp phosphor YAG (yttrium aluminum garnet) activation of elements from traditional CeNd to the current Yb / Er ; The emergence of these new applications or to procure certain very rare earth elements with the growth in demand. The data show that benefit the development of new LED lamp phosphors (Er: YAG), doped yttrium aluminum garnet as a new type of active elements, their prices to stimulate demand by emerging downstream, surged 21 percent last week, the future is expected with LED lights demand growth continue to rise. We believe the future with the development of downstream applications, the other in the heavy rare earth elements such as erbium as demand is expected to be released.

Third, the government fist shot smuggling, is at the time the situation improves

(A) heavy combat illegal mining of rare earths, the looming end of the policy

Illegal poaching of rare earth has been affected the healthy development of China's rare earth industry, the most important factor. In the rare earth market price downturn, illegal rare earth resources in the absence of tax and environmental costs, profits can still dumping low-priced to the market, some species once occupied the spot market more than 7 percent. In addition, due to the illegal smuggling of rare earth and quota tariffs, overseas rare earth price volatility, and represents a significant premium to keep domestic prices.

Policy efforts to strengthen the supply side lead to contraction of the looming end of the policy. Jiangxi and Guangdong government recently launched a joint fight against illegal rare action. According to the People's Government of Ganzhou, Jiangxi and network data show: June 22-23, Jiangxi and Guangdong provinces mineral resources first joint meeting of the joint law enforcement held in Ganzhou. The meeting held that the two provinces of joint law enforcement supervision area of ​​mineral resources, is to implement the beginning of this year the national land and resources law enforcement work of the forum and the "Southern five provincial regulatory region 15 City RE development joint action program" of the spirit, and further intensify inter-provincial provinces between the protection of mineral resources and the crackdown on illegal mining, mineral resources together to build joint enforcement mechanism provinces a major initiative to strengthen inter-provincial mineral resources law enforcement and regulatory provinces not only significant but also very necessary. Through the establishment of inter-provincial "mutual trust and cooperation, coordination, territorial responsibility, fast and efficient, crack down on" joint enforcement mechanism in mineral resources, mineral resources, to further increase the two provinces interprovincial protection and joint crackdown on illegal mining, work together to strengthen right at the junction of the two provinces of the illegal mining regulation of behavior, can be done promptly found and dealt with, in time to stop, for improving the performance of mineral resources, law enforcement and regulatory law enforcement to monitor implementation of the measures of great practical significance. In addition, the Conference adopted negotiated and signed the "Jiangxi and Guangdong provinces on mineral resources together to build inter-provincial joint enforcement mechanism advice." The two sides agreed to establish joint opinions, information exchange, joint law enforcement, research and exchange four cooperative system, to further increase the provinces interprovincial mineral resources protection and crackdown on illegal mining. Government efforts to strengthen the fight against illegal rare earth supply-side causes shrinkage is caused by the recent pick up rare earth prices bottomed out the main predisposing factors.

Early Ganyue private joint combat illegal rare earth ore, rare earth prices is caused by the sharp rebound in the major predisposing factor; dysprosium, terbium and other varieties of prices led from the bottom has risen over 70%, so we think that if the recent government actions to combat illegal rare earth comprehensive upgrade expanded to the national level, it is expected to stimulate the rare earth prices continue to rise, the future gains or exceed our previous forecast (double bottom).

Released the second batch of mandatory planning, policy linkage enhancements

Recent MIIT announced the second batch of rare earth mandatory plan, including mineral products 46,900 tons, 45,150 tons smelting products. The mandatory plans have a greater than previously published methods change: a) originally published by MLR is responsible for total control of mineral exploitation, the harmonization by the Ministry of release; 2) of the original total control of artificial mineral exploitation of its divided into light and heavy rare earths, this does not make that distinction. We believe that the indicators published more scientific and rational forms: First, indicators linked to mining and smelting, more in line with actual production of rare earth (especially in the South of heavy rare earth); followed by the management of the indicator simple distinction of light and heavy rare earth mine to deepen light and heavy REE management, more attuned to the practical application of downstream demand; This indicates that the linkage between national RE policy significantly enhanced and more scientific and reasonable.

Forced to speed the integration of rare earth WTO litigation

Europe and the United States at the WTO to actively promote on Chinese rare earth litigation procedure: From March 13, 2012 has made claims, Yan card process time. From China previously unsuccessful "nine kinds of raw materials," the Case, the "rare earths case" likelihood of success are slim, and the flow time will be shortened (nine kinds of raw materials case lasted two and a half years). Europe Day in accordance with the claims and the WTO procedures, in November 2013, WTO expert investigation team report will be published ruling, the losing country is a high probability event, after losing the Chinese government at the latest to be canceled within 15 months of rare earth export quotas and Tariffs, or they will suffer retaliation policy in Europe and America. We believe that the government in response to the WTO litigation earth will eventually be phased rare earth export quotas and tariffs, in order to avoid the relevant sanctions; and the use of improved resource tax or a way to increase green taxes, to protect resources and the environment. If the earth will still scattered upstream, then illegal rare earth or will re-occupy the mainstream market, we believe WTO litigation would speed the integration of rare earth Forced.

(Three) if looming large group, is at the time the situation improves

National's goal is integration of rare earth resources in the formation of large-scale cross-regional Rare Earth Group. Currently Northern LREE pattern has been set, we expect the Baotou, Jiangxi Copper, Steel Research Group will be composed of rare earth in northern formally established in 2013 year. Southern Rare Earth resources integration in two steps: first, the main origin of the earth be carried out in the province integration; Second, the central enterprises to set up a joint inter-regional and local national Rare Earth Group.

Five core initially, looming large group. 2012 Guangdong, Jiangxi, Guangxi, Fujian, Hunan and other provinces have formally established local Rare Earth Group, the integration of rare earth resources in the province, indicating that more than half of Southern Rare Earth integration process; but integration at the national level, Rare Earth Group impasse, it needs force to break, so we expect that the state or to introduce policies to promote the South ionic rare earth resource integration. We believe that countries in the Southern Rare Earth Group formed will also be taken step by step strategy: 1) The Government will determine the leading integrated core business: We expect Minmetals and Chinalco will become the central level representatives at the local level in order to Ganzhou and Guangdong Province Rare Earth Group dominated likely; 2) led to the formation of the core business across the region Rare Earth Group: We believe that by resource distribution can be set separately in Guangdong, Guangxi, Yunnan (Guangdong and aluminum led) and Jiangxi, Fujian, Hunan (Ganzhou and Minmetals dominant) two Southern Rare Earth Group, so far, China's three major Rare Earth Group has looming.

Wait landing dividend policy, the situation improves is the time. Since May 2011, the government in line with rational exploitation of rare earth resources and environmental protection principles, the introduction of a "State Council on promoting the sustained and healthy development of rare earth industry, a number of opinions" (No. 12) as the core of a series of policies to promote rare earth resources consolidation. Policy in the implementation process, although there are problems, but also achieved some success, according to legal rare earth mining and smelting enterprise caliber statistics, in 2012 China's rare earth concentrate and oxide production decreased 10.53% and 15.31%, China Rare Earth legitimate supply contract for three years, the same period exports of rare earth products also declined. This suggests that national governance policies bear fruit, the concentration of the legitimate field of rare earth has been significantly improved, therefore, we expect the second half of countries will introduce something like "No. 12" heavyweight earth policy that if it continues to focus on combating illegal rare earths and formation of a large group of rare earth, then the industry fundamentals are expected situation improves, rare earth prices are expected to rise there is a general restorative, when rare corporate earnings are expected to bottom out.


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