Due to environmental reasons, the production of medium and heavy rare earth mines in Jiangxi region has been suspended, and domestic smelting and separation plants are highly dependent on imported mines. The mining of ion type rare earths in the southern region has a significant impact on the surrounding environment of mines. Therefore, since 2018, all rare earth mines in Jiangxi have been shut down. The rare earth mines in southern Jiangxi have been shut down for nearly 3 years and have not yet resumed production. According to the quota indicators of the Ministry of Industry and Information Technology in 2018, the quota for ion type rare earths in Jiangxi Province accounts for 44% of the total national quota. After the shutdown of mines in Jiangxi, domestic smelting and separation enterprises need to rely heavily on imported mines. According to the information we obtained from our research in Ganzhou last week, about 50% -80% of the raw materials for several large smelting and separation plants in Ganzhou currently come from Myanmar mines. After Myanmar's import restrictions, the company's raw material imports have decreased by about half. In the context of domestic mine shutdowns, import restrictions in Myanmar will exacerbate the shortage of mine supply.

The raw ore inventory of the smelting separation plant is low, and from April to May, the separation plant may face the dilemma of "no rice to cook". 1) Rare earth mines in Jiangxi have been shut down for several years, and the safety stock of smelting and separation enterprises is usually 3-4 months. Therefore, it is expected that the inventory of domestic mines in most separation plants has been basically exhausted. 2) From November to December last year, Myanmar's imports of minerals were restricted, and the channels for separating enterprises to reserve imported mineral inventories were also blocked. Since November, the amount of imported rare earth minerals has remained low, and the original inventories are expected to be basically exhausted. 3) In 2018, due to the tightening credit environment, most small and medium-sized smelting and separation plants did not have sufficient cash flow reserves for raw material inventory. The above three factors have led to a decrease in the raw ore inventory of local separation enterprises in Jiangxi to 2-3 weeks. If Myanmar's imported ore is completely stopped from May, separation plants will face the dilemma of "no rice to cook". For the separation plant, if the quota quota for the current year is not used up, the quota for the next year may decrease, so the separation plant will also have great motivation to ensure normal production.

Investment advice

If Myanmar's mineral imports continue to be blocked, it will benefit the improvement of the supply and demand pattern of medium and heavy rare earth minerals, boost the price of medium and heavy rare earths, and maintain the industry's recommended rating. Since January, against the backdrop of continuous tightening of supply, the prices of medium and heavy rare earths have been raised. According to Asian Metal Network's quotation, the price of dysprosium oxide is 1.28 million yuan/ton, up 6% from the beginning of the year, and the price of terbium oxide is 2.965 million yuan/ton, up 1% from the beginning of the year. Considering that Myanmar's mineral imports may be completely banned in May and Jiangxi's medium and heavy rare earth mines are still suspended, separation plants heavily rely on imported minerals, and smelting separation plants have low inventory, there will be a significant shortage of supply for medium and heavy rare earths, driving up their prices.

Related listed companies of Zhongzhong Rare Earth Target: Shenghe Resources, Minmetals Rare Earth, Guangsheng Nonferrous, Northern Rare Earth, Xiamen Tungsten Industry, etc.