The strong expectation of policy dividends, coupled with the imminent arrival of a new round of spot deposits, may help the rare earth sector to rise again. A-shares have already taken the lead in responding: data from the Shenzhen Stock Exchange's Dragon and Tiger List shows that among the top five positions with the highest amount of purchases of Minmetals rare earths yesterday, institutional seats occupied four.

A new round of rare earth storage is imminent

Due to the recent approval of the "5+1" rare earth group for the integration of China's rare earth industry, which was formulated by the Ministry of Industry and Information Technology at the beginning of the year, the concept of rare earth permanent magnets in the rare earth sector surged by 1.77% yesterday. Multiple stocks in sectors such as Minmetals Rare Earth, Shenghe Resources, and Jiaozuo Wanfang rose their daily limit, while Guangsheng Nonferrous Metals, Baosteel Rare Earth, Zhongke Third Ring, and Zhongse Shares also saw the highest gains. In some cases, some individual stocks have been swept away by institutions. According to data from the Shenzhen Stock Exchange's Dragon and Tiger List, among the top five stocks with the highest amount of purchases of Minmetals rare earths, institutions occupy four seats.

It is worth noting that the current enthusiasm for rare earth spot collection and storage has also been high. It is understood that the rare earth spot market has already started, and there is a renewed enthusiasm for storage expectations. The main performance is that the spot market for praseodymium neodymium oxide has shown some reaction, with an increase of 0.88% within a week and a 2.7% increase compared to the same period last month. And currently, the market is active, with an increase in inquiries and widespread reluctance to sell; Dysprosium oxide has increased by 8.71% compared to the previous month, and the prices quoted by dysprosium oxide merchants are firm, with most traders holding onto the goods and unable to sell them.

Due to the implementation of rare earth storage in mid-2014 being an indicator for 2013, the market expects the possibility of further storage in 2014. It is reported that currently, the State Grid Corporation of China has signed rare earth storage agreements with China Aluminum, Minmetals, Baosteel, Ganxi, Xiamen Tungsten Industry, and Guangsheng Nonferrous Metals. Industry insiders say that signing the agreement means that the rare earth storage has been officially finalized, but the official documents have not been finalized, and companies dare not disclose specific details. Based on the average price of the previous 6 months, the price of rare earth storage should be at least 10% higher than the market price.

Analysts point out that after mid year storage, the current market spot is tight, and the second storage may drive a significant increase in rare earth prices. According to the performance of the rare earth sector during the expected period of rare earth collection and storage in 2014, the leader of the rare earth sector increased by 30% in the two weeks during this period.

Multiple parties working together to assist in takeoff

In addition, at the policy level, from the perspective of national top-level design, the expected launch of the rare earth market is in line with the national top-level strategic design: it is expected to continue to focus on medium and heavy rare earths.

Specifically, the WTO lawsuit has failed, the export quota system has been abolished, and the country needs to take necessary measures to protect the value of resources, prevent scarce resources from being lost overseas at low prices, and leave environmental impacts at home (the environmental restoration cost per ton of medium and heavy rare earths is as high as 100000 yuan, and the actual production cost throughout the entire life cycle is as high as 200000 yuan). Currently, the price of medium and heavy rare earths is seriously underestimated. Secondly, the implementation of the strictest environmental protection law in 2015 will further increase the production costs of medium and heavy rare earths. Once again, the previous storage results did not have a sustained positive impact on rare earth prices. The cancellation of export quotas is imminent, and the national storage policy is expected to increase. In the future, there will be a synergistic effect, and key varieties are expected to still be mainly dysprosium and praseodymium neodymium oxide.

Huachuang Securities believes that with the joint efforts of multiple parties, the rare earth sector is expected to rise again. China Merchants Securities also pointed out that the rare earth sector is currently at the bottom of fundamentals and stagnant stock prices. The rectification and governance of the rare earth industry is not only necessary for transformation, but also a manifestation of governance. Rare earth is expected to achieve a bottoming out reversal in 2015, and both the industry structure and rare earth prices will enter a new stage of development.