Rare earth prices have rebounded since the bottom in early March, with an increase of about 30% so far. Taking praseodymium neodymium oxide as an example, it rebounded from 340000 yuan/ton in early March to the current 450000 yuan/ton, with a 32% increase. The stabilization and rebound of rare earth prices indicate that both buyers and sellers in the market recognize the current rare earth prices, and downstream manufacturers have started to replenish inventory, thereby boosting the prices of rare earths. The stabilization and recovery of rare earth prices, no longer like last year's roller coaster ride, is conducive to the healthy development of the rare earth deep processing industry.

We believe that the performance of the neodymium iron boron permanent magnet material sub industry in the first half of 2012 is guaranteed, and securities firms are optimistic about the investment opportunities in this sub industry in the first half of the year.

In addition, with the arrival of the peak demand season in the second quarter, orders for neodymium iron boron permanent magnet materials have begun to rebound, which is conducive to improving the industry's performance. Taking industry leader Zhongke Sanhuan as an example, the company obtained an order of 250 million yuan from Bakker Magnetics in the Netherlands, which is three times the order amount of the company in 2010. This reflects the recovery of demand in the neodymium iron boron sub industry from one aspect.

It was observed that the rare earth deep processing industry did not begin to adjust prices in the first half of 2011, but only began to adjust the linkage between factory prices and raw material prices after the third quarter. Therefore, the industry's performance base in the first half of the year was relatively low, laying the foundation for a year-on-year increase in performance in the first half of 2012. Based on this, it is highly likely that the industry's first quarter and semi annual performance will increase year-on-year. The recently released first quarter performance report of Zhenghai Magnetic Materials, which showed a year-on-year growth of 20%, partially confirms the judgment.