China Mining Weekly: Rare Earth Countermeasures and Lithium Supply Game Escalate, Autonomous Driving Tech IPOs Send New Signals

Bottom Line

Key signals this week: China's rare earth export control countermeasures have been implemented, strengthening strategic advantages; the lithium market faces rebalancing pressure due to expectations of the Jianxiawo mine resuming production and new capacity trial runs, with lithium prices under short-term pressure; mining profits surged 33.5% but with structural divergence. Investors are advised to reduce lithium sector exposure in the short term, increase positions in strategic resource targets such as rare earths and uranium, and pay attention to the long-term value of two autonomous driving mining technology companies' Hong Kong IPOs.

Key Developments

1. China Imposes Export Controls on U.S. Rare Earth Companies as Countermeasure — On June 22, China announced a ban on 10 U.S. companies from purchasing more dual-use items, including the two largest U.S. rare earth companies, aiming to safeguard China's strategic advantage in rare earths. Portfolio Impact: This move further consolidates China's control over the medium and heavy rare earth supply chain, strengthening support for rare earth prices. Investors can increase holdings in domestic rare earth mining and processing leaders while remaining vigilant about short-term volatility from potential U.S. countermeasures.

2. Key Obstacle to Jianxiawo Lithium Mine Resumption Cleared, Lithium Market Under Pressure — On June 18, the land pre-review opinion for the Jianxiawo lithium mine project was published, clearing a critical land obstacle for resuming production. Market expectations of increased lithium supply led to a 6.58% weekly plunge in the main contract of lithium carbonate futures. Portfolio Impact: If the Jianxiawo mine officially resumes production, short-term lithium supply additions will suppress lithium prices, negatively impacting high-cost lithium salt companies. It is recommended to reduce holdings in pure lithium mining targets and shift to companies with integrated lithium processing or technological barriers.

3. Dangba Spodumene Mine 5,000 t/d Expansion Project Enters Trial Production — Guocheng Mining's subsidiary Jinxin Mining announced that the expansion project of the Sichuan Maerkang Dangba spodumene concentrator has entered trial production, with a designed daily processing capacity of 5,000 tons. Portfolio Impact: New capacity is about to be released, further intensifying expectations of oversupply in lithium resources. However, actual output may be lower than the design value, requiring tracking of actual ramp-up progress. For domestic lithium processing companies, although facing raw material competition, this is beneficial in the long term for consolidating China's lithium self-sufficiency rate.

4. China's Mining Profits Up 33.5% YoY in Jan-May, Leading Industrial Sector — Data from the National Bureau of Statistics on June 27 showed that from January to May, total profits of mining enterprises above designated size reached 479.52 billion yuan, up 33.5% year-on-year, significantly higher than the overall 18.8% growth rate of industrial enterprises above designated size. Portfolio Impact: The mining sector's overall profitability is strong, but profits are concentrated in the upstream resource end. It is recommended to focus on sub-sectors with high profit elasticity, such as copper, gold, and rare metals, while being wary of the risk of marginal profit growth slowing down.

5. Two Autonomous Driving Mining Technology Companies Pass Hong Kong Stock Exchange Hearing — EACON Mining (solely sponsored by Haitong International) and Yikong Zhijia (invested by Zijin Mining and CATL) have successively passed the hearing for listing on the Main Board of the Hong Kong Stock Exchange, disclosing their prospectuses on June 24 and 25 respectively, preparing for Hong Kong IPOs. Portfolio Impact: The commercialization of autonomous driving in mines is accelerating, highlighting the scarcity of technology targets. It is recommended to pay attention to their IPO pricing and the composition of cornerstone investors. If valuations are reasonable, participation in subscriptions can be considered to capture the long-term dividends of the mining industry's intelligent transformation.

Sector Pulse

Risk Watch

• Lithium Supply Exceeding Expectations Risk — The official resumption of the Jianxiawo mine, combined with the concentrated release of new capacity like Dangba, could lead to a further decline in lithium carbonate prices below the cost line, triggering shutdowns of high-cost mines. Probability: High. Impact: High.

• Overseas Mining Policy Risk — Indonesia raised the nickel ore pricing correction coefficient to 30%, severely impacting Chinese nickel mining companies; the U.S. may retaliate against China's rare earth countermeasures, affecting a broader range of mining cooperation. Probability: Medium. Impact: Medium.

• Geopolitical Escalation Risk — China's sanctions on U.S. rare earth companies may intensify the decoupling of supply chains between China and the U.S., affecting the global rare earth trade pattern and China's rare earth export volume. Attention should be paid to whether this triggers WTO disputes or upgrades in technology export restrictions. Probability: Medium. Impact: High.

Outlook

Key Events and Observation Indicators Next Week:

• Official announcement of Jianxiawo mine resumption and actual timeline
• Price trend and open interest changes of lithium carbonate futures main contract LC2609
• Subscription response and final pricing for EACON Mining and Yikong Zhijia IPOs
• Whether Indonesia's nickel ore policy will be further tightened
• Whether China's Ministry of Commerce will publish detailed rules for rare earth export controls

Position Adjustment Suggestions: Maintain a neutral weighting in the mining sector in the short term, strategically increase holdings in rare earth and uranium targets, keep a low weighting in lithium resource stocks, and wait for the Jianxiawo resumption to materialize and signs of lithium price stabilization; optionally allocate a small position to participate in autonomous driving mining technology IPOs as a long-term layout.