Analysts at Berenberg initiated coverage of Rainbow Rare Earths with a ‘buy’ recommendation and a 33.0p price target on Thursday, implying a whopping 228% upside.
Berenberg stated that due to “a complex recovery process”, China “dominates” the production of refined metal, at roughly 90% of global supply but, owing to a mixture of “significant demand” growth and strategic uses, users were increasingly searching for non-Chinese sources of metal – something the analysts said was “difficult” and would “take time”.
The German bank said that from a demand standpoint, major growth comes in the form of electric vehicles and wind turbines, with four key rare earths used in the manufacture, and efficient use, of permanent magnets.
“We forecast a supply-unconstrained CAGR (2022-30) of 13% for neodymium, 12% for praseodymium, 12% for dysprosium and 14% for terbium across these two key uses,” said the analysts.
Berenberg added that realistically, supply will struggle to meet demand, although substitution and thrifting will offset some of this demand.
“However, for efficient use of EVs and wind turbines, rare earths are needed, and the market will still need non-Chinese supply, supporting demand over the next decade and beyond. While prices may be volatile depending on Chinese supply action, we think that rising global demand for non-Chinese supply will be price-supportive in the long term,” added Berenberg.
Reporting by Iain Gilbert at Sharecast.com