In-Depth Analysis of the Investment Logic for the Rare Earth Permanent Magnet Sector

As of January 16, 2026, the ex-factory price of neodymium-praseodymium oxide is RMB 682,500 per ton, up 11.88% from the pre-holiday period; the ex-factory price of neodymium-praseodymium alloy is RMB 822,500 per ton, up 11.53% from the pre-holiday period. Varieties such as dysprosium oxide and terbium oxide have also seen increases ranging from 12% to 14% [1].

The Rare Earth Permanent Magnet Sector (BK0578) has risen over 82% cumulatively since 2025, significantly outperforming the Shanghai Composite Index over the same period. 8 individual stocks have risen over 100%, including Xiamen Tungsten Industry (↑ over 200%), China Rare Earth (↑ over 170%), and Northern Rare Earth (↑ over 140%) [1].

As of January 16, 2026, the total margin financing balance of the 24 margin trading targets in the rare earth permanent magnet sector reached RMB 31.353 billion, an increase of over 10% from the end of 2025. 20 targets received margin financing position increases, with 14 individual stocks seeing an increase rate of over 10% and 4 stocks seeing an increase rate of over 20% [1].

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In the first quarter of 2026, Northern Rare Earth and Baotou Steel Co., Ltd. adjusted the transaction price of rare earth concentrates to RMB 26,834 per ton (dry basis, REO=50%) excluding tax, marking the 6th consecutive increase since the third quarter of 2024 [1]. This trend reflects:

• Persistent tight spot supply of upstream raw materials
• Significant improvement in concentration after the integration of domestic rare earth industry groups
• Steady release of rare earth mining and smelting separation quotas, but limited incremental volume

The upstream rare earth industry has undergone in-depth integration in recent years, enhancing the concentration of the domestic rare earth industry. As the world’s largest rare earth enterprise group, Northern Rare Earth holds over 40% of the global light rare earth market share, approximately 72% of the domestic light rare earth market share, and 67% of the national light rare earth mining quotas [3].

CITIC Construction Investment predicts that global new energy vehicle production will grow to over 26 million units in 2026, corresponding to a demand for neodymium-iron-boron permanent magnet materials of 66,000 tons [1]. In fields including automobiles, industrial motors, wind power generation, industrial robots, humanoid robots, energy-saving elevators, and inverter air conditioners, the global demand for high-performance neodymium-iron-boron is expected to reach 188,000 tons in 2026, representing an increase of over 80% from 102,000 tons in 2022.

CITIC Securities predicts that global rare earth demand may reach 821,000 tons in 2030, with a gap of 140,000 tons compared to the projected supply of 681,000 tons for the same year. The supply-demand gap will continue to expand from the expected 10,000 tons in 2025, providing long-term support for rare earth prices [1].

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As a key material for the new energy revolution and high-end manufacturing, the strategic value of rare earths continues to rise. China’s dominant position in global rare earth supply is unlikely to change in the short term, providing solid long-term support for the sector.

The mismatch between supply-side constraints and demand-side growth is not a short-term phenomenon, but rather structural and long-term. The expected 140,000-ton supply-demand gap in 2030 means that the central level of rare earth prices will continue to rise [1].

Traditionally, the rare earth sector was regarded as a cyclical sector, with valuations mainly fluctuating along with commodity prices. However, subtle changes are occurring in the current investment logic:

Dimension	Traditional Logic	Current Changes
Valuation Basis	Commodity price cycle	Resource scarcity premium + growth premium
Driving Factors	Short-term supply-demand mismatch	Long-term structural supply-demand gap
Market Expectations	Dominated by price fluctuations	Dominated by deterministic earnings growth

Northern Rare Earth’s estimated net profit attributable to shareholders in 2025 is expected to increase by 116.67%-134.60% year-on-year; Jinli Permanent Magnet’s 2025 net profit growth upper limit is 161%; Zhenghai Magnetic Materials’ 2025 net profit growth upper limit exceeds 300% [1]. The substantial earnings growth validates the effective transmission of rising rare earth prices to corporate profits.

Great Wall Securities pointed out that against the background of supply constraints, demand in fields such as new energy, wind power, and robotics is strong, and the sector’s medium- to long-term development trend is clear [2]. Huayuan Securities believes that the transaction price of rare earth concentrates in the first quarter between Baotou Steel Co., Ltd. and Northern Rare Earth rose 2.4% month-on-month, supporting the central level of rare earth prices [2].

Large-scale margin financing position increases (14 stocks with over 10% increase) indicate professional investors’ recognition of the sector’s medium- to long-term investment value [1].

Northern Rare Earth’s current PE (TTM) reaches 86.26 times, significantly higher than its historical average. DCF valuation analysis shows that the current stock price ($51.07) is overvalued by 57.8% under the conservative scenario, and only has 124.9% upside potential under the optimistic scenario [0].

Northern Rare Earth has recently fluctuated in the range of RMB 48-53 per share, with the MACD indicator converging near the zero axis, and the KDJ indicator’s J value exceeding 80 indicating short-term overbought conditions [0][3].

Although institutions are generally optimistic about the medium- to long-term trend, the rapid short-term price increase may trigger correction pressure.

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Stock	Cumulative Increase Since 2025	PE (TTM)	Margin Financing Addition	Investment Rating
Northern Rare Earth	105.2%	42.5	15.2%	Buy (Target Price: RMB 65-75)
China Rare Earth	98.5%	38.2	12.8%	Buy
Jinli Permanent Magnet	72.3%	35.8	18.5%	Buy
Zhenghai Magnetic Materials	78.2%	45.2	22.1%	Buy
Galaxy Magnetic Co., Ltd.	82.1%	52.3	14.8%	Hold

The sector has seen a large short-term increase, facing profit-taking pressure. Investors are advised to pay attention to the resistance level around RMB 52, and wait for a correction to accumulate positions on dips.

With the arrival of the peak production and sales season for new energy vehicles, rare earth demand will be further released, and the sector is expected to continue its upward trend. It is recommended to gradually build positions in the range of RMB 45-50.

The value of rare earths as a strategic resource will continue to rise, and the expectation of a 140,000-ton global rare earth supply-demand gap in 2030 provides long-term support for the sector. It is recommended to adopt a phased position-building strategy and hold for the long term.

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1. Continuous Factors:
   The core logics such as the strategic resource attribute of rare earths, the supply constraint pattern, and the demand growth trend remain unchanged.

2. Marginal Changes:
   The investment logic is shifting from a “pure cyclical logic” to a “mixed cyclical+growth logic”, and the market has started to grant a higher growth premium to the rare earth sector.

3. Risk Warning:
   Current valuations have partially overdrawn the expected future growth, and investors need to pay attention to short-term correction risks. It is recommended to adopt a phased position-building strategy and hold for the medium to long term to capture the sector’s growth dividends.

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[1] Eastmoney - Rare Earth Prices Rise Significantly, Margin Financing Funds Add Positions in 14 Stocks by Over 10% (https://finance.eastmoney.com/a/202601203623713130.html)

[2] AAStocks - Medium- to Long-Term Development Trend of the Rare Earth Sector is Clear (http://www.aastocks.com/sc/stocks/analysis/china-hot-topic-content.aspx?id=YLC6103112N&source=YOULIAN&catg=4)

[3] Eastmoney - Daily Research on a Listed Company: Northern Rare Earth (https://caifuhao.eastmoney.com/news/20260114164212835516560)

[0] Jinling AI Financial Database (Real-time Market, Financial Analysis, Technical Analysis, DCF Valuation)