In-Depth Analysis of Competitive Barriers and Investment Value in China's Rare Earth Industry

Based on collected data and in-depth analysis, I now present a comprehensive investment value assessment report for the rare earth industry.

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China’s rare earth reserves rank first globally. According to 2025 data from the U.S. Geological Survey (USGS), China’s rare earth reserves reach 44 million metric tons, accounting for 36.7%-48.9% of global reserves [1]. Most critically, China is the only country in the world that can stably supply all 17 rare earth elements. Specifically:

Resource Type	China’s Global Share	Strategic Value
Light Rare Earths (Bayan Obo Mine)	80%	Main source of basic rare earth elements such as lanthanum, cerium, praseodymium, and neodymium
Heavy Rare Earths (Southern Jiangxi Deposits)	70%	Key strategic elements such as dysprosium and terbium, accounting for 80% of global reserves
Total Rare Earth Oxides (REO)	40%	Mining quotas are strictly controlled, with 250,000 metric tons of light rare earths and 19,500 metric tons of heavy rare earths in 2025

The controlling shareholder of Northern Rare Earth, Baotou Steel Group, holds the exclusive mining rights to Bayan Obo Mine, the world’s largest rare earth mine, with its annual rare earth quota allocation accounting for over 50% of the national total, representing a significant resource advantage [2].

China occupies an absolute dominant position in the global rare earth separation and processing sector:

• Separation and Processing Capacity
  : China controls approximately 90% of the world’s rare earth refining capacity, a scale advantage that is difficult for other countries to replicate [3]
• Separation Technology Level
  : The newly commissioned quantum cascade separation equipment in China can increase purity to the “six nines” level (99.9999%), simplifying processes by 40% and reducing costs by 40%
• Full Industry Chain Coverage
  : A complete vertically integrated system has been formed, spanning ore mining, separation and purification, metal smelting, and permanent magnet material processing

China Rare Earth (000831.SZ), a subsidiary of China Rare Earth Group, can achieve full separation of 15 single high-purity rare earth elements, demonstrating strong technical capabilities [2].

Rare earth permanent magnet materials are the largest application area of deep-processed rare earths, consuming over 40% of global rare earth output. China has absolute advantages in this field:

• NdFeB Capacity
  : In 2024, China’s output of rare earth permanent magnet blanks exceeded 250,000 metric tons, accounting for over 90% of the global share [3]
• Export Market
  : Exports of permanent magnet materials increased from 27,000 metric tons in 2016 to 58,000 metric tons in 2024, with continued expansion of market space
• Technological Leadership
  : JL MAG’s dysprosium (terbium) diffusion technology is globally leading, with total capacity expected to reach 60,000 metric tons by 2027

JL MAG (300748.SZ), Zhenghai Magnetic Materials, and Zhongke Sanhuan have formed an oligopolistic competition pattern in the high-performance NdFeB sector, with high market concentration [3].

The Chinese government implements strict total volume control through regulations such as the “Rare Earth Management Regulations”:

• Mining Quota System
  : Annual total volume control is implemented for rare earth mining, with total mining volume capped at 265,000 metric tons in 2025
• Upgraded Export Restrictions
  : In April 2025, restrictions were imposed on 7 categories of medium and heavy rare earths, further strengthening their strategic resource attributes
• Industry Integration Promotion
  : China Rare Earth Group was established and continues to integrate industry resources to increase concentration

Such policy barriers make it difficult for overseas competitors to enter the Chinese market, forming a de facto supply monopoly pattern [1].

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Rare earth prices have continued to strengthen since 2024, forming a clear upward trend:

[4]:

Period	Price	MoM Growth	Cumulative Growth
Q3 2024	16,741	-	-
Q4 2024	18,000	+7.5%	+7.5%
Q1 2025	21,000	+16.7%	+25.5%
Q2 2025	24,500	+16.7%	+46.4%
Q3 2025	26,200	+6.9%	+56.6%
Q4 2025	26,834	+2.4%	+60.3%
Q1 2026	26,834	+2.4% (planned)	+60.3%

[5]:

• January 12, 2026: 637,000 CNY/metric ton, up 4.8% WoW, up 59.3% YoY
• December 31, 2025: 607,000 CNY/metric ton, up approximately 45% from the start of the year
• Praseodymium-Neodymium Metal: 760,700 CNY/metric ton, Neodymium Metal: 777,500 CNY/metric ton

Rare earth prices have risen for six consecutive quarters, with a cumulative increase of over 60%, and the industry has entered a boom cycle with both volume and price increasing [4].

:

1. Expected supply contraction from the domestic smelting and separation white list
2. Illegal mining has been further curbed after the implementation of the “Rare Earth Management Regulations”
3. Rare earth quota control has become stricter, making it difficult to rapidly increase total volume

:

1. New Energy Vehicles
   : Pure electric vehicles use 2-3kg of rare earth permanent magnets per vehicle, while plug-in hybrid vehicles use 1.5kg
2. Wind Power Equipment
   : Direct-drive wind turbines have strong demand for high-performance magnetic materials
3. Robot Industry
   : Mass production of humanoid robots is imminent, with significant usage per unit
4. Consumer Electronics and Industrial Motors
   : Demand for energy-saving motor replacements continues to grow

Dongfang Securities pointed out that the recovery of rare earth prices is highly sustainable, and the sector is expected to see a double boost in profits and valuations [1].

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According to the latest reports, the G7 is planning the following measures [6][7]:

Measure Type	Specific Content	Expected Effect
Price Mechanism	Set a rare earth price floor (floor price of $110/kg for NdFeB mixed rare earths, approximately 800,000 CNY/metric ton)	Provide floor support for overseas production
Tariff Measures	Impose tariffs or “carbon taxes” on Chinese rare earth exports	Increase the export cost of Chinese rare earths
Geographic Restrictions	Implement “friend-shoring” of supply chains	Reduce dependence on China
Joint Development	G7 ministerial consultations to coordinate mine development	Diversify supply sources

Notably, the Trump administration suspended the decision to impose additional tariffs on rare earths on January 14, 2026, prioritizing negotiations with various countries. This indicates that the U.S. still needs to carefully weigh its position on rare earth issues [7].

[6]:

• 2025-2026: Launch negotiations and infrastructure construction
• 2027: New supply sources in Australia, Vietnam, etc. will initially reach production capacity
• 2028-2030: Initial results of supply chain restructuring will be seen

:

Challenge Type	Specific Performance
Insufficient Technology Accumulation	Overseas lacks mature separation and purification technology
Strict Environmental Approval	Long environmental assessment cycles and high costs in Western countries
Huge Capital Investment	The EU’s “Resource Action Plan” only has 3 billion euros
Long Capacity Construction Cycle	The project supported by Volkswagen of Germany will not be put into production until 2027

Volkswagen of Germany invested $120 million to support the expansion of an Australian rare earth plant, but the project will not be put into production until 2027 [6].

Based on the above analysis, the medium-term forecast for the global rare earth supply chain pattern is as follows:

Time Node	China’s Market Share	Expected Change
2025	Over 90%	Current level
2027	80-85%	Slight decline
2030	75-80%	Moderate decline

: The global rare earth supply chain will present a pattern of “China-led, multi-point supplementation”. China’s market share may drop from the current over 90% to 75%-80%, but it will still maintain absolute dominance [6].

In response to the challenges from the G7, China will adopt the following countermeasures [6]:

1. Further Tighten Rare Earth Export Restrictions
   : In April 2025, restrictions were imposed on 7 categories of medium and heavy rare earths
2. Accelerate Industry Chain Integration
   : Increase resource concentration and bargaining power
3. Promote Technological Innovation
   : Consolidate technological advantages in key links such as separation and purification
4. Strengthen International Cooperation
   : Cooperate with “Global South” countries to expand resource sources

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Based on the latest market data [8]:

Company	Ticker	Market Capitalization (CNY 100 million)	Stock Price (CNY)	P/E Ratio	ROE	Net Profit Margin
Northern Rare Earth	600111.SS	1823	50.43	85.18x	9.26%	5.13%
China Rare Earth	000831.SZ	565	53.20	521.42x	2.28%	3.03%
Shenghe Resources	600392.SS	417	23.78	46.21x	8.56%	6.64%
JL MAG	300748.SZ	503	36.71	81.92x	8.53%	8.56%

:

• Northern Rare Earth
  : Debt risk rating “low risk”, current ratio 2.72, sufficient liquidity
• JL MAG
  : Accounting policy “conservative”, high depreciation/capital expenditure ratio, room for performance improvement

Against the background of rising rare earth price centers and growing demand, the performance growth path of major rare earth enterprises is clear [6]:

:

• 2025: Net profit of 2.5-3 billion CNY (Q4 price rebound + impairment reversal)
• 2026: Net profit of 10 billion CNY (high-end magnetic material volume growth + price of 700,000 CNY/metric ton)
• 2027: Net profit of 15 billion CNY (full industry chain monopoly + technological licensing boom)
• Three-year compound growth rate exceeds 200%

:

• 2025: Net profit of 1.5-2 billion CNY (price increase of medium and heavy rare earths)
• 2026: Net profit of 3-4 billion CNY (heavy rare earth quota advantage)
• 2027: Net profit of 5-6 billion CNY (capacity release + technology premium)

:

1. The rare earth price center will rise from 500,000 CNY/metric ton in 2025 to 700,000 CNY/metric ton in 2026
2. The 50,000 metric ton high-performance magnetic material project will reach production capacity in 2026, with magnetic material sales increasing by 50%
3. After the second phase of the green smelting project is put into operation, the per-ton cost will be reduced by another 5%, saving over 300 million CNY annually

Based on technical analysis results [8]:

Stock	Closing Price	Support Level	Resistance Level	MACD	KDJ	Trend Judgment
Northern Rare Earth	50.43	47.41	51.34	Bullish (no_cross)	Death Cross (69.2/73.7)	Consolidation
China Rare Earth	53.20	48.26	54.17	Bullish (no_cross)	Death Cross (77.1/78.6)	Consolidation
JL MAG	36.71	32.00	42.00	-	-	-
Shenghe Resources	23.78	21.00	26.00	-	-	-

: Major rare earth stocks are in a consolidation phase. The MACD indicator shows a bullish arrangement, while the KDJ indicator shows short-term overbought but has not yet formed a trend signal. The trading range reference is 47.41-51.34 CNY for Northern Rare Earth and 48.26-54.17 CNY for China Rare Earth [8].

:

• Northern Rare Earth: PE 85.18x, PB 7.63x (light rare earth leader, relatively reasonable valuation)
• China Rare Earth: PE 521.42x, PB 11.68x (scarcity premium for medium and heavy rare earths)
• Shenghe Resources: PE 46.21x, PB 3.13x (full industry chain layout, most attractive valuation)

[6]:

Allocation Ratio	Target	Target Price Range (CNY)
Core Allocation (60%)	Northern Rare Earth (600111)	80-100
	China Rare Earth (000831)	85-100
	Shenghe Resources (600392)	35-40
Growth Allocation (30%)	JL MAG (300748)	55-65
	Xiamen Tungsten Industry (600549)	70-80

: Adopt a phased position-building strategy, and it is recommended to hold for 2-3 years to fully enjoy industry dividends.

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:

1. Extremely High Competitive Barriers
   : The four barriers of resources + technology + industry chain + policy are difficult to replicate in the short term
2. Clear Upward Price Trend
   : Rare earth prices have risen for six consecutive quarters, and the industry has entered a new boom cycle
3. Certain Demand Growth
   : Downstream demand from new energy vehicles, wind power, robots, etc. continues to be released
4. Strong Policy Support
   : The “Rare Earth Management Regulations” have been implemented, industry integration has accelerated, and strategic value has become prominent
5. Limited Impact of G7 Plans
   : It is difficult to change China’s dominant position in the short term, and it may instead accelerate the upgrading of rare earth controls

:

• Sustained rise in rare earth prices
• Introduction of implementing rules for the “Rare Earth Management Regulations”
• Downstream new energy vehicle sales exceed expectations
• Mass production progress of humanoid robots
• Progress of G7 supply chain restructuring is lower than expected

Risk Type	Specific Content	Impact Assessment
Policy Risk	Changes in rare earth export control policies	Neutral to Bullish
Price Risk	Sharp fluctuations in rare earth prices	Affects profit forecasts
Demand Risk	New energy vehicle sales fall short of expectations	Affects valuation
Geopolitical Risk	G7 supply chain restructuring exceeds expectations	Significant long-term impact
Valuation Risk	Current PE is relatively high, with pullback pressure	Short-term risk

: Seize structural opportunities and focus on leading enterprises

:

1. Northern Rare Earth (600111.SS)
   : Absolute leader in light rare earths, with resource advantages and industrial competitiveness continuing to be consolidated
2. China Rare Earth (000831.SZ)
   : Leader in medium and heavy rare earths, benefiting from price increases of strategic elements such as dysprosium and terbium
3. JL MAG (300748.SZ)
   : Leader in high-performance magnetic materials, with global leading advantages continuing to expand
4. Shenghe Resources (600392.SS)
   : Full industry chain layout, most attractive valuation

:

• First batch (30%): Build positions near the current price
• Second batch (30%): Add positions when the stock price pulls back by 5%-10%
• Third batch (40%): Add positions after confirming the upward trend

: It is recommended to hold for 2-3 years to fully enjoy the dividends of industry transformation

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China’s rare earth industry occupies an irreplaceable dominant position in the global rare earth supply chain by virtue of four competitive barriers: resources, technology, industry chain, and policy. Although the G7 plans to jointly reduce its dependence on China’s rare earths, it is difficult to change this pattern in the short term due to factors such as insufficient technical accumulation, strict environmental approval, and huge capital investment.

Against the background of sustained rising rare earth prices, strong downstream demand growth, and increased policy support, the rare earth sector has significant investment value. It is recommended that investors focus on resource leaders and industry chain-integrated enterprises, adopt a phased position-building strategy, and hold for the medium to long term to fully enjoy industry dividends.

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[1] Jiemian News - The strategic resource status of rare earths is upgraded again, and the Rare Earth ETF Harvest (516150) lays out domestic rare earth industry chain opportunities with one click (https://www.jiemian.com/article/13858447.html)

[2] Caifuhao - Price increase over 60%! Rare earths usher in a double boost in profits and valuations, in-depth interpretation of the industry chain (https://caifuhao.eastmoney.com/news/20260110195220332614360)

[3] China Rare Earth Industry Association - Average Price List of Rare Earth Products in December 2025 (https://www.ctia.com.cn/)

[4] Shanghai Securities News - Rare Earth Price Index officially launched (https://finance.sina.com.cn/stock/roll/2026-01-11/doc-inhfxmct7827084.shtml)

[5] NetEase News - Praseodymium-neodymium oxide price breaks 2025 high, up 4.8% WoW (https://www.163.com/dy/article/KJ56OF3K0534A4SC.html)

[6] Eastmoney - In-depth analysis of the far-reaching impact of G7 reducing Chinese rare earth imports on rare earth stocks (https://caifuhao.eastmoney.com/news/20260113183044719959650)

[7] Nikkei Chinese - Trump administration suspends additional tariffs on rare earths (https://cn.nikkei.com/politicsaeconomy/economic-policy/61085-2026-01-15-12-49-25.html)

[8] Jinling AI - Financial Data and Technical Analysis of Listed Companies in the Rare Earth Industry [0]