CITIC SEC: Strategic metal value reassessment in progress, tightening supply and demand expected to drive long-term magnesium price increase.

CITIC SEC has released a research report stating that magnesium alloy has good casting properties and seismic resistance, making it an ideal material for lightweighting. With the steady progress in the downstream applications of large automotive structural parts and Siasun Robot & Automation, the demand for magnesium for each vehicle is expected to grow rapidly. Human-shaped Siasun Robot & Automation is expected to become a core driving factor for the long-term growth of magnesium alloy demand. The current magnesium-aluminum ratio is at a historical low, with the cost-effectiveness of magnesium alloys continuing to be prominent. Tightening supply and demand are expected to drive magnesium prices up in the long term. As for rare earth elements, the prices of praseodymium and neodymium remain strong, with downstream demand in areas such as new energy vehicles, air conditioning, and consumer electronics continuing to grow. The commercialization process of human-shaped Siasun Robot & Automation is accelerating, opening up potential growth space for long-term demand for rare earth permanent magnets. With fundamental support, the prices of rare earth elements are expected to remain stable and gradually increase, and the allocation value of the rare earth permanent magnet sector continues to be recommended. Key points of CITIC SEC are as follows: Magnesium alloy is an ideal lightweight material, with steady progress in downstream applications such as large automotive structural parts and Siasun Robot & Automation. Magnesium alloy has a low density, good casting properties, and seismic noise reduction capabilities, making it an ideal lightweight material. As magnesium alloys are gradually being used in the automotive field, large magnesium alloy automotive parts such as electric drive housings, seat crossbeam frames, and door inner panels are being put into use, and the current maturity of magnesium alloy technology can achieve applications of over 50kg per vehicle. With the further increase in the penetration rate of magnesium alloys, the amount of magnesium used per vehicle is expected to grow rapidly. In December 2024, Baowu Magnesium Technology and Estun Automation released a new magnesium alloy Siasun Robot & Automation product "ER4-550-MI," which is 11% lighter and consumes 10% less energy compared to the aluminum alloy version. In addition, it performs excellently in shock absorption, electromagnetic shielding, and heat dissipation, marking a breakthrough in the application of magnesium alloys in Siasun Robot & Automation. Human-shaped Siasun Robot & Automation is expected to become a core driving factor for the long-term growth of magnesium alloy demand. China's original magnesium production capacity utilization has long been at a low level, and anti-monopoly policies are expected to drive the magnesium industry towards high-quality development. According to the Magnesium Industry Branch of the Nonferrous Metal Industry Association, in 2024, China's original magnesium production capacity was 1.488 million tons, with an output of 1.026 million tons, and a capacity utilization rate of only 70%. Industry monopoly has brought multiple harms to the magnesium industry. In a vicious competitive environment, some enterprises, in order to reduce costs, have resorted to measures such as using low-quality and low-priced products, resulting in a market flooded with non-standard products. This not only seriously damages the legitimate rights and interests of consumers but also greatly restricts the industry's technological upgrading and high-quality development. The arrival of the anti-monopoly wave will not only help drive magnesium prices gradually towards a reasonable range but also guide the entire industry from the previous "price war" to a "quality war," gradually eliminating backward production capacity and contributing to the long-term healthy development of the magnesium industry. Recently, magnesium prices have stabilized and rebounded, and tightening supply and demand are expected to drive magnesium prices up. According to Shangmagnesium.com, as of August 18, the ex-factory price of 99.9% magnesium ingot in Fugu area was 17,300 yuan per ton, which has risen by approximately 14.4% from the bottom. Regarding supply, considering that the high-temperature weather continues to affect the efficiency of original magnesium smelting, it is expected that the increase in original magnesium production resulting from the recovery of previous inspections will be less than the production reduction. As for demand, the current magnesium-aluminum ratio is about 0.95, at a historical low, with the cost-effectiveness of magnesium alloys continuing to be prominent and the demand for magnesium alloys steadily growing. Tightening supply and demand are expected to drive magnesium prices up in the long term. The prospects for emerging fields such as human-shaped Siasun Robot & Automation are promising, with downstream demand continuing to grow in areas such as new energy vehicles. According to data from the China Association of Automobile Manufacturers, in June 2025, China's automobile production was 1.268 million vehicles, a year-on-year increase of 45.4%, with the penetration rate of new energy vehicles increasing by 5.4 percentage points to 45.4%. Statistics from the National Bureau of Statistics show that from January to June 2025, the cumulative output of industrial Siasun Robot & Automation was 369,000 units, a year-on-year increase of 30.4%; the cumulative output of air conditioners was 163.2969 million units, a 4.0% increase year-on-year. Downstream demand for new energy vehicles, air conditioners, and industrial Siasun Robot & Automation is continuously growing. In addition, the accelerated commercialization process of human-shaped Siasun Robot & Automation is expected to open up long-term demand growth space for rare earth permanent magnets. Under neutral expectations, it is projected that by 2035, global demand for neodymium iron boron in the field of human-shaped Siasun Robot & Automation will increase to approximately 24,000 tons, with a corresponding CAGR of 75.0% from 2024 to 2035. The spot price of rare earth elements continues to rise, and the allocation value of the rare earth permanent magnet sector is continuously recommended. According to SMM, on August 15, the price of praseodymium neodymium oxide rose to 593,000 yuan per ton, an increase of 5.6% in a single day, while the price of metal praseodymium neodymium rose to 720,000 yuan per ton, up 4.7% on that day. The tight supply of upstream materials for rare earth elements, benefiting from strong demand from industries such as new energy vehicles and home appliances, combined with the continuous growth of orders for magnetic materials plants, as well as increasing export demand, further solidify the basis for price increases. The price of praseodymium neodymium is expected to remain on a strong upward trend, and the investment opportunity for the rare earth permanent magnet sector is continuously recommended. Risk factors: The risk of the penetration rate of magnesium alloy automotive components being lower than expected; fluctuations in the prices of rare earth raw materials, lower-than-expected economic development, and overseas expansion of rare earths. The risk of environmental policy enforcement being lower than expected.