[SMM Rare Earth Daily Review: Rare Earth Prices Fall Under Pressure, Upstream-Downstream Stalemate] Overall, rare earth market prices are broadly in the doldrums, mainly due to the dual impact of reduced downstream inquiries and the decline in Pr-Nd oxide futures prices. Under such circumstances, suppliers showed little initiative in offering, the tug-of-war between upstream and downstream remained at a stalemate, and market trading was sluggish. In the short term, Pr-Nd product prices are expected to consolidate within a narrow range, weighed by the upstream-downstream stalemate.

On July 27, shares of China Northern Rare Earth rose, closing up 1.15% at 39.48 yuan per share. In other news, the investor relations activity record for June 2026, announced by China Northern Rare Earth on July 21, showed: Q: What is the progress of the green smelting upgrade and transformation project? What benefits will the project bring to the company upon completion? China Northern Rare Earth responded: The company has invested in and constructed the new-generation rare earth green mining, beneficiation and smelting upgrade and transformation project. Phase I has already been put into production, with the production line fully connected; for Phase II, the main structure of the main process building has been completed, and equipment installation is underway. The project adopts industry-leading new processes, technologies and equipment to build a green, intelligent, intensive and high-end rare earth raw material industrial base. By creating a complete automated production line for rare earth smelting and adopting various intelligent equipment systems, the project enhances the intelligent level of green rare earth smelting equipment, enabling high-quality, high-efficiency, low-consumption and flexible intelligent production. It continuously improves the comprehensive utilization level of Bayan Obo resources, actively fosters a higher-quality, more efficient, better-structured, lower-carbon and safer industrial development landscape, effectively achieves the safe and sustainable development of the industry chain and supply chain, and further strengthens the competitive advantage of China's rare earth industry. Upon completion, the project is expected to reduce acid and alkali unit consumption by over 20%, reduce fresh water usage by 30%, and save approximately 15% of energy, effectively raising the level of intensive, efficient, low-carbon and environmentally sound utilization of rare earth resources. It will significantly promote the sustainable, high-quality development of the rare earth industry and downstream application fields, make positive contributions to regional economic and social development, and deliver favorable social benefits. Q: How large are the medium-heavy rare earth reserves in the Bayan Obo mine? China Northern Rare Earth responded: The total medium-heavy rare earth reserves in the Bayan Obo mine are very substantial. In light of changes in the global rare earth resource supply landscape, the company is committed to the research and application of all rare earth elements and categories. It has recently increased investments in medium-heavy rare earths, continuously pursuing technological innovation and boosting R&D spending to provide downstream clients with cost-effective products or solutions. Q: What is the company's sales model for rare earth products? How are prices determined? China Northern Rare Earth responded: The company's products are mainly divided into rare earth raw material products, rare earth new material products, and rare earth end-use application products. Among these, rare earth raw material products include rare earth salts, rare earth oxides and rare earth metals, which serve as the main production raw materials for downstream rare earth new material and new material product processing enterprises. Rare earth new material products include rare earth magnetic materials, polishing materials, hydrogen storage materials, catalytic materials, and rare earth alloys. The company's rare earth end-use application products primarily consist of rare earth permanent magnet high-efficiency energy-saving motors, solid-state hydrogen storage cylinders, and hydrogen-powered two-wheelers. The company generally adopts sales models such as long-term agreements and retail, with long-term agreements accounting for over 50%. Its selling prices are set based on market demand, market price fluctuations, and actual transactions, with metal prices also referencing those from the Baotou Rare Earth Products Exchange. Question: How does the company view future rare earth product prices? What are the downstream applications of rare earth? China Northern Rare Earth responded: Against the backdrop of global carbon neutrality, the vigorous growth of new energy industries and technological innovation has brought new development opportunities for rare earth as a key element of new quality productive forces. Rare earth, recognized as a critical mineral factor globally, has become a vital pillar for future industries. Rare earth product prices are mainly influenced by a combination of factors such as market supply, demand, and market expectations. In the short term, due to the pace of industry supply and demand and downstream procurement cycles, rare earth prices are expected to remain range-bound and fluctuate. In the medium term, the supply pattern in the rare earth industry will remain orderly and controllable, with prices generally running steadily. In the long term, as incremental demand from new energy, high-end equipment, humanoid robots, and other sectors continues to be released and steadily develop, rare earth prices will receive strong support. Against the broader backdrop of carbon neutrality, rare earth connects with manufacturing upgrades, technological innovation, global industry chain adjustments, and national development strategies. The long-term development of the rare earth industry is stable and positive. With the advancement of carbon peak and carbon neutrality, the core demand for rare earth is shifting towards green low-carbon new energy and high-end manufacturing. High-performance rare earth permanent magnets are used in new energy vehicle drive motors, new energy ship power systems, electric aircraft, eVTOL, etc. Some MLCC (multilayer ceramic capacitors) also add trace amounts of rare earth oxides for doping modification, driving continuous growth in rare earth demand. Question: What are the company's plans for extending its industry chain? Will it further expand into downstream end-use applications? China Northern Rare Earth responded: After years of development, the company has taken the lead in the industry to become an integrated, group-level publicly listed firm that combines rare earth smelting and separation, functional materials, application products, scientific research, and trade. It has formed an industrial structure based on rare earth resources, centered on smelting and separation, focused on new materials, and oriented towards expanding into end-use applications. Relying on an innovation-driven development strategy, it continuously promotes industrial structure adjustment, transformation and upgrading, achieving integrated development across the upstream, midstream, and downstream of rare earth, and building an industry-leading competitive advantage across the entire industry chain. The company has deployed six major industries: magnetic materials, polishing materials, energy storage materials, catalytic additives, high-purity metals and alloys, and optical functional materials. It has: (1) established the rare earth permanent magnet material–permanent magnet motor industry chain, continuously enhancing the production capacity of permanent magnet motors; (2) established the rare earth hydrogen storage material–solid-state hydrogen storage industry chain, focusing on solid-state hydrogen storage applications such as hydrogen fuel two-wheelers, solid-state hydrogen storage forklifts, and hydrogen refueling stations, to promote industrial application; (3) established the rare earth alloy–intermediate alloys of rare earth iron, rare earth aluminum-magnesium industry chain, constructing a demonstration line for large-scale production of high-purity rare earth metals and targets, driving breakthroughs in applications of rare earth aluminum-magnesium alloys in advanced rail transit and lightweight profiles; (4) consolidated and expanded the leading position of the rare earth polishing materials industry in and outside China, breaking through production technologies for high-end products such as high-performance rare earth polishing powders and polishing for high-grade glass substrates, and breaking foreign monopolies; (5) established the rare earth catalytic material–exhaust purification functional device industry chain, focusing on industrial exhaust gas treatment, automotive exhaust gas purification, volatile organic compound (VOC) treatment, and petrochemicals to achieve industrialization; and (6) expanded the application fields of rare earth optical functional materials, strengthening the commercialization and promotion of rare earth multi-color reflective thermal insulation coatings, rare earth infrared radiation materials, and rare earth infrared heat storage and temperature-rise materials. For example: to address the poor thermal insulation of architectural glass, the company developed a rare-earth nano thermal-barrier coating that significantly reduces air-conditioning energy consumption; to mitigate heat accumulation on building exteriors and metal surfaces, the company developed a rare-earth multi-colour reflective thermal-insulation coating containing over 25% lanthanum-cerium compounds, effectively alleviating the heat-island effect; leveraging the unique photofunctional properties of light rare earths, the company developed polyester-based rare-earth functional fibres that enable smart thermal regulation such as heat storage, thermal insulation and UV shielding. Closely following market demand, the company continuously increases R&D investment, optimises product structure and performance, and meets the differentiated needs of downstream clients. Q: How is the company progressing in the utilisation of rare-earth secondary resources? China Northern Rare Earth responds: In the current context of green and low-carbon development, the prospects for rare-earth secondary resource utilisation are broad. The Rare Earth Regulations explicitly encourage and support enterprises in adopting advanced and applicable technologies and processes to conduct comprehensive utilisation of rare-earth secondary resources. Meanwhile, the continuously climbing demand for rare earths in fields such as NEVs, wind power and consumer electronics is also providing more resources for rare-earth secondary resource utilisation. For a long time, the company has been consistently focusing on secondary resource recycling and recovery. Regarding the return of scrap after the sale of Pr-Nd alloy, since 2022 the company has included a provision when signing supply agreements with downstream magnetic material enterprises: NdFeB enterprises using the company’s Pr-Nd alloy must return the production scrap generated in their own manufacturing processes to the company for resource recycling and recovery in accordance with market principles. At present, the company has established a circular loop spanning from raw ore to metal, magnetic material, and the recycling of scrap generated from magnetic material production. The company has made deep deployments in both the north and south. In the south, its controlled subsidiary Xinfeng Xinli has completed the main plant construction for its Phase-I NdFeB scrap recycling and utilisation project, and on-site equipment is undergoing orderly installation and commissioning; its rare-earth oxide comprehensive utilisation technological transformation project has received approval from the Department of Industry and Information Technology of Jiangxi Province. In the north, its controlled subsidiary Jinmeng Rare Earth has completed the “NdFeB Scrap Recycling Automated Production Line” project and the automation upgrade and renovation of the rare-earth concentrates separation line; both lines have commenced production, with notable capacity release. The company actively deploys and develops the rare-earth secondary resource utilisation industry, builds a 10kt-scale resource recycling capacity, achieves full-element rare-earth recycling and recovery through effective utilisation of secondary resources, and enhances the economic value of rare-earth elements. Q: What are the future development trends for polishing materials? China Northern Rare Earth responds: The global polishing fluid market is maintaining a steady growth trend. Demand for high-end semiconductor polishing materials, such as those for AI chips and memory-wafer capacity expansion, continues to rise. Going forward, high-end, refined and green development will become the main theme. The localisation rate of specialised polishing fluids for China’s high-end integrated circuits will increase significantly, while demand for polishing in conventional optics and panels will grow at a moderate pace. The company ranks first in the industry in both production and sales volume and market share in the rare earth polishing materials sector, with its three polishing powder production enterprises covering high-end, mid-end, and low-end segments. In the rare earth polishing materials field, the company has multiple advantages in scale, technology, and upstream-downstream industry chain integration, enabling it to quickly respond to demand from various downstream application fields, achieve steady growth in production and sales, and continuously increase the share of high-value products, holding a leading position in the industry. The company is deeply involved in national strategic scientific and technological breakthroughs, has led the formulation of multiple national and industry standards, completed national-level scientific research projects such as the “863 Program” and “Torch Program,” holds 4 invention patents and 6 utility model patents, and its core technical indicators have reached internationally advanced levels. With self-developed cutting-edge technology, its products are renowned in and outside China for uniform particle size, high polishing efficiency, and strong suspension, and are widely used in manufacturing fields such as liquid crystals, hard disk glass substrates, curved and flat cover glass for mobile phones, crystal and rhinestone ornaments, traditional optical and precision optical components, semiconductor photomasks, and integrated circuits. Q: What is the proportion of externally purchased ore in the company’s raw material supply? China Northern Rare Earth responded: The rare earth raw materials required for the company’s production mainly come from the Baiyun Obo mine, the world’s largest co-existing ore containing rare earths and other elements. The company’s proportion of externally purchased ore is very small and is dynamically adjusted based on production line conditions, market prices, downstream client demand, and other factors. China Northern Rare Earth’s semi-annual performance forecast shows: According to preliminary estimates by the company’s financial department, net profit attributable to shareholders of the parent company in H1 2026 is expected to be RMB1.98 billion to RMB2.06 billion, an increase of RMB1.05 billion to RMB1.13 billion compared with the same period last year (statutory disclosed data), up 112.74% to 121.33% YoY. Net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses in H1 2026 is expected to be RMB1.99 billion to RMB2.07 billion, an increase of RMB1.093 billion to RMB1.173 billion compared with the same period last year (statutory disclosed data), up 121.90% to 130.82% YoY. The main reasons for the expected year-on-year increase in performance: In H1 2026, the company served the national rare earth resource strategy and fully implemented the requirements for security management and control of the rare earth industry chain. Affected by factors such as constrained raw material supply, multi-point release and sustained growth of downstream demand, rare earth product prices showed an overall strengthening trend and consolidated. Focusing on the annual production and operation targets, the company planned holistically and implemented comprehensive measures, strengthened overall budget management, coordinated cost reduction and efficiency improvement, scientifically arranged production scheduling, intensified marketing operations, deepened reform and innovation, enhanced group management and risk prevention and control, advanced the deep integration of professional management, lean management, and 5S management at a high quality, promoted the construction of key projects, accelerated the development of new quality productive forces through management and scientific research innovation, and provided solid support and assurance for achieving good operating results with strong industry chain value creation capability and core competitiveness. The Company scientifically refined production organization and operations, and the production of rare earth smelting and separation products, rare earth metal products, and rare earth new materials all reached record highs for the same period; the Company’s subsidiary, Inner Mongolia Northern Rare Earth Magnetic Materials Co., Ltd., achieved revenue of approximately 9.5 billion yuan in H1, up about 107% YoY, maintaining growth for three consecutive years; its subsidiary Inner Mongolia Xi'ao Ke Hydrogen Storage Alloy Co., Ltd. officially put into operation the first batch of 1,000 hydrogen-powered two-wheelers in Baotou, with cumulative safe driving mileage reaching 170,000 km, achieving notable demonstration results. The Company persisted in benchmarking against advanced internal and external practices to tap internal potential, strengthened lean management, and significantly improved multiple economic and technical indicators. Based on precise measures for each business segment: the smelting and separation segment overcame new production cost changes brought by rising prices of raw and auxiliary materials, effectively managed cost fluctuations, scientifically organized production scheduling, and ensured supply to meet new product demand; the rare earth metal segment took the reinforcement of lean production concepts as a starting point, used digital and intelligent means to further strengthen on-site process operation management, and drove new breakthroughs in economic and technical indicators such as quality and material ratios; the rare earth new materials and applications segment fully leveraged the advantages of new capacity, precisely aligned with client needs, and achieved new progress in driving sales through production. Deepening industry chain synergy and coordination, while ensuring stable product supply, it solidified the foundation of downstream client cooperation. The Company closely followed market demand, strengthened marketing management, optimized sales structures, client credit evaluations, and product account period management, adjusted and shortened account periods by category, secured the fundamental base with long-term agreement orders, and met differentiated market demand through retail. Sales of rare earth metals and magnetic materials steadily increased, achieving full coverage of top-tier players in magnetic materials; sales of lanthanum-cerium products increased YoY, further digesting historical inventory; polishing material sales increased YoY; developed 5 new pieces of equipment and 20 customized and specialized new products, continuously expanding product application scenarios. The Company efficiently advanced key project construction, continuously enhancing its intelligent and informatization level. The first phase of the rare earth green smelting upgrade and transformation project has been put into operation, with all production lines fully connected, and the second phase construction progressing in an orderly manner; industry chain projects such as mergers and acquisitions, joint ventures, and capacity expansion for rare earth metals, magnetic material alloys, magnets, and secondary resource utilization are accelerating their implementation. The secondary resource utilization project achieved volume growth and quality-efficiency improvements; the Company's digital and intelligent transformation pace quickened, with its digital and intelligent level continuously improving. Regarding the 2026 business plan, China Northern Rare Earth announced in its 2025 annual report that: 2026 is the opening year of the "15th Five-Year Plan", and is an important year for the Company to advance high-quality development and accelerate building itself into a world-class rare earth leader. The company will adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, focus on forging a strong sense of community for the Chinese nation, fully implement the guiding principles of the 20th National Congress of the Communist Party of China and all plenary sessions of the 20th Central Committee, and carry out the important speeches and instructions of General Secretary Xi Jinping on Inner Mongolia and the rare earth industry, as well as the decisions and deployments of higher authorities including the Inner Mongolia Autonomous Region and Baotou City. It will uphold the general principle of pursuing progress while ensuring stability, fully, accurately and comprehensively apply the new development philosophy, bravely fulfill its responsibilities and missions, steadily improve operational quality and efficiency, build an industrial system covering all elements and categories, promote the deep integration of technological and industrial innovation, accelerate the pace of deepening reforms, enhance modern governance capabilities, continuously strengthen core functions and improve core competitiveness, speed up the development into a world-leading rare earth enterprise, ensure a good start and solid first steps for the "15th Five-Year Plan" period, and make new and greater contributions to the construction of the "Two Rare Earth Bases." Main production and operation targets for 2026 (these targets are solely planned objectives; whether they can ultimately be achieved is uncertain and does not constitute a substantive commitment to investors; investors and relevant parties should maintain sufficient risk awareness and understand the differences among plans, forecasts, and commitments): achieve operating revenue of over 44 billion yuan and total profit of over 3.5 billion yuan. On the premise of meeting operational targets, employee income will be linked to corporate economic benefits and labor productivity in the same direction. A review of the SMM Pr-Nd oxide price trend in H1 shows that the average price of Pr-Nd oxide on June 30 was 742,500 yuan/mt, up 136,000 yuan/mt from 606,500 yuan/mt on December 31, 2025, representing an H1 increase of 22.42%. The average price of Pr-Nd oxide in H1 this year was 740,530.17 yuan/mt, compared with an average of 430,952.99 yuan/mt in H1 2025, a YoY rise of 309,577.18 yuan/mt, or 71.84%. According to SMM quotes, on July 27, the average price of Pr-Nd oxide was 765,000 yuan/mt, up 0.99% from the previous trading day. For the rare earth market outlook, in the short term, amid a stalemate in the tug-of-war between upstream and downstream, Pr-Nd product prices are expected to move sideways within a narrow range, with limited room for significant upward or downward movement. Supporting factors come from the supply side — recently some raw ore separation enterprises have suspended operations, production at scrap recycling enterprises remains persistently low, and overall oxide supply is relatively tight, forming bottom support for prices. Pressuring factors come from the demand side, as new orders for magnetic material enterprises are unlikely to recover quickly in the short term, buyers have low acceptance of high prices, and the market lacks sustained upward momentum. For heavy rare earths, after experiencing adjustments this week, dysprosium and terbium are expected to gradually stabilize as major players step in to purchase. From a medium-term perspective, most industry participants hold expectations for a demand recovery in the traditional peak season at the end of Q3, and coupled with the likely improvement in new export orders, the rare earth price center still has the potential to edge upward steadily after a period of consolidation. However, in the short term, close attention must be paid to the pace of downstream restocking and the purchasing moves of top-tier players. Recommended reading:

According to the Investor Relations Activity Record of Tianhe Magnetics (July 23, 2026): 1. What were the main drivers of the company's sales growth in H1 2026? Tianhe Magnetics responded: The company expects its net profit attributable to equity holders of the parent in H1 2026 to be 73 million yuan to 93 million yuan, up 36.56% to 73.98% YoY; and net profit after deducting non-recurring gains and losses attributable to equity holders of the parent to be 68 million yuan to 88 million yuan, up 91.94% to 148.39% YoY. This was mainly driven by overall high raw material price fluctuations in H1, the company's optimized pricing strategies for some existing and new orders, and raised product selling prices; the company proactively seized market opportunities and carried out sales efforts centered on "focusing on emerging markets, deepening customer relationships, and optimizing channel layout," achieving dual-driven growth in international and domestic markets with significant market development results. Overall operating revenue is expected to increase approximately 30% YoY, with domestic business revenue increasing approximately 50% YoY. For details, please refer to the company's disclosed 2026 H1 performance forecast. 2. What was the breakdown of the company's domestic and international business in H1 2026? Tianhe Magnetics responded: In 2025, the company’s international business generated operating revenue of 1,032.05 million yuan, accounting for 44.02%; domestic business generated revenue of 1,312.51 million yuan, accounting for 55.98%. For the H1 2026 breakdown, please refer to the company’s 2026 semi-annual report to be disclosed on August 26, 2026. 3. How is the construction progress of the new project of the subsidiary Tianhe New Materials planned? Tianhe Magnetics responded: Based on confidence in its own development and market prospects, and to meet current business planning and future development needs, the company invested in establishing the wholly-owned subsidiary Tianhe New Materials and is constructing the "Tianhe New Materials Rare Earth Zero-Carbon Industrial Park (High-Performance Rare Earth Permanent Magnets and Components, Equipment Manufacturing and R&D Project)." The project is progressing smoothly, with an initially planned capacity of 20,000 mt. The construction of this capacity will be steadily advanced by the company in line with market orders and company development. 4. How is the company’s expansion in new businesses? Tianhe Magnetics responded: The company is deepening its presence in emerging fields, developing customized magnets and components to precisely meet performance requirements in emerging markets. At the same time, it is accelerating the expansion of a diversified product system, actively promoting the R&D and industrialisation of high value-added products such as injection-molded magnets, bonded magnets, and magnetic assemblies, driving the company’s transformation and upgrade from a "magnetic material product supplier" to an "integrated rare earth permanent magnet solutions provider." In addition, the company's wholly-owned subsidiary Tianzhihe focuses on the R&D, production, manufacturing, and sales of key production equipment for rare earth permanent magnet materials. In 2025, the specialized production equipment developed by Tianzhihe, while meeting the needs of the parent company, successfully achieved commercialized external sales and deliveries. In 2025, cumulative external order signing amounted to 37.3066 million yuan, with external operating revenue reaching 25.4441 million yuan. 5. How does the company respond to fluctuations in raw material prices? Tianhe Magnetics responded: The company's procurement model is centered on "procurement based on production plus safety inventory," achieving precise on-demand procurement and dynamic inventory management through ERP and other information systems. The company has signed long-term agreements with major suppliers, establishing a stable and reliable supply chain system, and employs a scientific reserve mechanism to flexibly adjust inventory levels, effectively smoothing raw material price fluctuations, thereby securing stable supply while controlling procurement costs and risks. 6. What is the impact of export control policies on the company? Answer: The company has always strictly adhered to all national laws, regulations, and regulatory requirements. Upon the release of relevant export control policies, it promptly deployed and proactively responded, comprehensively establishing and continuously improving a full-process compliance management system for export controls. The company strictly follows the compliance management system to carry out export license application work, obtaining export licenses issued by the Ministry of Commerce in an orderly and lawful manner, thereby ensuring the smooth, orderly, sustained, and healthy development of its overseas international business. At the same time, the company continues to advance its market diversification strategy, actively expands into different regional markets, reduces reliance on single markets, and enhances its overall risk resistance capability. Furthermore, the refinement and strict enforcement of relevant export control policies have significantly raised the industry's standardization level. This creates favorable conditions for enterprises that have established sound compliance systems and can continuously meet licensing and delivery requirements, helping to guide industry resources toward well-operated enterprises, supporting them to secure long-term cooperation with high-quality clients, and promoting the entire industry's development toward a more orderly and higher-quality direction. 7. Is there any plan to develop rare earth targets? Tianhe Magnetics responded: The company is a leading domestic provider of high-performance rare earth permanent magnetic materials, primarily engaged in the R&D, production, and sales of high-performance rare earth permanent magnetic materials such as sintered NdFeB and sintered SmCo. It also extends its industry chain to injection molded magnets, bonded magnets, and magnetic assemblies, offering clients comprehensive rare earth permanent magnet solutions. The company currently has no such R&D plan. 8. What is the company's view on future rare earth prices? Tianhe Magnetics responded: Rare earths are important strategic resources of the nation. Rare earth product prices are influenced by factors such as market conditions, policy changes, and industry supply-demand cycles. Fluctuations of rare earth prices within a reasonable range benefit the development of both upstream and downstream sectors of the rare earth industry chain. Tianhe Magnetics disclosed its semi-annual performance forecast on July 9, which showed, based on preliminary estimates by the financial department, that the net profit attributable to owners of the parent company for the first half of 2026 is expected to range from RMB 73 million to RMB 93 million. Compared with the same period last year (statutory disclosed data), this represents an increase of RMB 19.5448 million to RMB 39.5448 million, up 36.56% to 73.98% YoY. It is estimated that in H1 2026, the net profit attributable to shareholders of the parent company, excluding non-recurring gains and losses, will be between 68 million yuan and 88 million yuan, representing an increase of 32.5723 million to 52.5723 million yuan compared with the same period last year (as disclosed in statutory reports), up 91.94% to 148.39% YoY. Regarding the main reasons for the expected increase in H1 performance, Tianhe Magnetics stated: 1. In H1, raw material prices fluctuated at high levels overall. The company optimized its pricing strategy for some existing and new orders and raised product selling prices. 2. In 2026, the company proactively seized market opportunities, centered its sales efforts on "focusing on emerging markets, deepening customer relationships, and optimizing channel layout," achieving dual-wheel drive from both international and domestic markets, with significant results in market development. Overall operating revenue is expected to increase by approximately 30% YoY, of which domestic revenue is expected to grow by about 50% YoY. 3. During the reporting period, the impact of non-recurring gains and losses on net profit is estimated to be approximately 5 million yuan, compared with 18.0275 million yuan (after tax) in the same period last year. In its 2025 annual report, introducing its main business, products, and application fields, Tianhe Magnetics stated: The company is an advanced provider of high-performance rare earth permanent magnetic materials in China. Guided by the corporate vision of "being the innovator in permanent magnet material innovation," it mainly engages in the R&D, production, and sales of high-performance rare earth permanent magnetic materials such as sintered NdFeB and sintered SmCo, and extends its business to injection-molded magnets, bonded magnets, and magnetic assemblies, providing clients with comprehensive rare earth permanent magnet solutions. Focused on independent R&D and technological innovation, and oriented by application scenarios and development needs in cutting-edge fields such as NEVs and automotive parts, wind power, intelligent manufacturing, and 3C consumer electronics, as well as emerging industries such as humanoid robots and low-altitude economy, the company effectively leverages the fundamental and pioneering role of rare earth permanent magnets as key strategic materials, continuously promoting the innovation and application of high-performance, resource-efficient rare earth permanent magnet materials, and facilitating downstream technological upgrades, product replacements, and industrial advances. Regarding its business plan, Tianhe Magnetics introduced in its 2025 annual report: 2026 marks the second year since Tianhe Magnetics' listing and is also the opening year of the 15th Five-Year Plan. Standing at a new starting point, the company adopts "innovation" as its annual development theme, adheres to the philosophy of "breaking conventions and embracing change," and continues to deepen its presence in the high-performance rare earth permanent magnetic materials sector. The company will rely on two major rare earth bases in Baotou, focus on core technology upgrades and the expansion of both domestic and international high-end markets, seize the strategic opportunities of global energy transition and intelligent development, and foster "development" through "innovation."Under the leadership of the Board of Directors, the Company will further integrate resources, leverage its strengths, and systematically advance all work around its operational objectives to ensure high-quality and sustainable development. In 2026, the Company will focus on the following tasks: 1. With "innovation" at the core, continuously strengthen R&D investment to drive product and technology upgrades. 2. Heading toward the new: focus on expanding new products, new clients, and new markets. 3. Continuously strengthen production and quality management to improve yield and workflow efficiency. 4. Deepen the construction of digital smart factories to continuously enhance production efficiency. 5. Steadily advance fundraising and investment projects and new project construction, expanding capacity to underpin performance growth. (1) Continue to advance the construction of fundraising and investment projects. In 2026, the Company will continue to push forward the implementation of these projects as planned. Upon full completion and reaching full production, the Company will achieve an annual capacity of 12,300 mt. Through automated production line upgrades, deployment of digital management systems, and green production process upgrades, the Company will continuously enhance manufacturing efficiency, ensure capacity matching at every stage from blank production to finished product inspection, and lay a solid foundation for performance growth. (2) Advance the construction of the Tianhe New Materials project. The first phase of the "Tianhe New Materials Rare Earth Zero-Carbon Industrial Park (High-Performance Rare Earth Permanent Magnets and Components, Equipment Manufacturing and R&D Project)", invested and constructed by the Company’s subsidiary Tianhe New Materials, has been launched. Upon completion, the project will further expand business scale and enhance the Company’s overall profitability, market competitiveness, and risk resilience. 6. Enhance intelligent equipment manufacturing capabilities and cultivate new growth drivers. 7. Management empowerment: continuously strengthen organization and talent development. 8. Continuously improve ESG efforts to promote sustainable development. 9. Strengthen investor relations and market value management to drive the continuous enhancement of the Company’s value. In its announcement regarding the risk of rare earth raw material price fluctuations, Tianhe Magnetics stated: The main raw materials required for the Company’s production are rare earth metals, which are relatively high-priced. Affected by multiple factors such as macroeconomic conditions, the trade environment, industrial policies, and market supply and demand, their prices fluctuate noticeably. Although rare earth permanent magnet enterprises can dynamically adjust product selling prices based on raw material price changes and other factors, due to the price lock-in of some existing orders and the negotiation period required for new order price adjustments, product price adjustments typically lag behind raw material price fluctuations. If raw material prices experience sustained wild swings in the future and the Company fails to respond in a timely and effective manner, it may adversely affect its operating results. Countermeasures: To address this risk, the Company continuously strengthens supply chain management, enters into long-term agreements with major suppliers to establish stable cooperative relationships, and implements scientific raw material reserve strategies to smooth out the impact of price fluctuations. Looking back at the price performance of Pr-Nd alloy in H1 this year, we can see: at the beginning of the year, Pr-Nd alloy was quoted at 740,000 yuan/mt. Driven by a confluence of supply-demand fundamentals, including tight spot Pr-Nd oxide supply and stockpiling purchases by downstream magnetic material enterprises around the Chinese New Year, prices surged rapidly, hitting a yearly high of 1.09 million yuan/mt at the end of February, representing a cumulative increase of 47.3%. In March, end-use demand contracted materially, coupled with the spread of bearish market news, causing prices to quickly pull back to around 900,000 yuan/mt. In April, supported by higher ore concentrate prices that boosted oxide costs, production suspensions at some separation plants, and the release of export orders during the export control window period, prices recovered and rebounded to 999,000 yuan/mt. From May to June, downstream demand entered the traditional off-season, with magnetic material enterprises reducing inquiries and purchases for Pr-Nd alloy, causing prices to hit bottom again at 830,000 yuan/mt. In mid-to-late June, large-scale production cuts at scrap recycling enterprises due to tax invoice issues led to expectations of tightening supply, driving Pr-Nd prices to bottom out, closing at 905,000 yuan/mt on June 30. The average price in H1 was about 905,000 yuan/mt, with a fluctuation range of 48.3%. On July 24, the average price of Pr-Nd alloy was 917,500 yuan/mt, edging up 0.27% from the previous trading day. From the Pr-Nd market perspective, the rise in Pr-Nd oxide futures prices reduced suppliers' willingness to sell spot cargo at low prices, prompting them to raise their Pr-Nd oxide quotes. However, market inquiry activity did not pick up as a result, and actual price gains were relatively limited. Supported by raw material costs, Pr-Nd alloy prices also rose in tandem, and low-priced cargo in the market gradually tightened. Yet, downstream magnetic material enterprises still had limited inquiries, making high-priced alloy transactions difficult, and market trading remained stagnant. Over the short term, affected by the tug-of-war stalemate between upstream and downstream, Pr-Nd product prices are expected to move sideways. Recommended reading:

This week, the rare earth oxide market was under pressure and in the doldrums overall, with the price centers of Pr-Nd, dysprosium, and terbium moving lower to varying degrees, though a notable divergence signal emerged toward the weekend. Pr-Nd oxide declined steadily from early in the week through Thursday, falling from about 763,000-766,000 yuan/mt to 752,000-755,000 yuan/mt, a cumulative drop of around 11,000 yuan/mt during the week. On Friday, boosted by higher futures prices and positive news, spot suppliers' willingness to sell at low prices decreased, and offers rebounded slightly, but actual transactions followed up limitedly, while downstream magnetic material enterprises' inquiries remained sluggish. Dysprosium oxide showed a sustained grind lower this week. Prices held steady at the start of the week, but against a backdrop of persistently sluggish inquiries and stagnant trading, the price center gradually moved down, and as of today, dysprosium oxide pulled back to the 1.4-1.42 million yuan/mt range. Terbium oxide saw the widest fluctuations this week, falling steadily over the first four days, with offers pulling back to the 6.7-6.8 million yuan/mt range by Thursday. On Friday, as a top-tier player entered the market to purchase, low-priced cargo quickly dried up, suppliers raised offers accordingly, and prices rebounded slightly. Overall, the main drag on the rare earth market this week was weak downstream demand. Entering the off-season in July, magnetic material enterprises saw insufficient new orders, adopted extremely cautious procurement strategies, and only maintained essential restocking, with inquiries and transactions staying sluggish. Meanwhile, the spot Pr-Nd oxide market was weighed down by heavy wait-and-see sentiment, with an intense tug-of-war between upstream and downstream. Some traders cut prices slightly to sell, but plants, supported by costs, were more willing to hold prices firm, making low-priced cargo consistently hard to find, which led to a stalemate in actual transactions. Currently, overall trading activity in the rare earth oxide market remains low, and the sustainability of Friday's price rebound is yet to be seen. Looking ahead to the near term, with the stalemate between upstream and downstream, Pr-Nd product prices are expected to move sideways in a narrow range, with limited room for either a sharp rise or fall. Supporting factors lie on the supply side—recently, some raw ore separation enterprises have suspended operations, and scrap recycling enterprises' production has stayed persistently low, keeping overall oxide supply relatively tight and providing a bottom to prices. Conversely, drags come from the demand side: in the short term, new orders for magnetic material enterprises are unlikely to recover quickly, buyers show low acceptance of high prices, and the market lacks momentum for sustained upward movement. For heavy rare earths, dysprosium and terbium are expected to gradually stabilize after this week's correction as major players step in to purchase. In the medium term, most industry participants hold expectations of demand recovery in the traditional peak season at the end of Q3, and coupled with potentially improving new export orders, the rare earth price center still has potential to trend steadily higher after a period of consolidation. However, in the short term, close attention must be paid to downstream restocking pace and the procurement moves of top-tier players.

[SMM Analysis: Supply Tightens but Demand Weak, Rare Earth Market Sees Stalemate; Will Prices Recover in the Short Term?] This week, the overall rare earth oxide market was under pressure and in the doldrums. The price centers of Pr-Nd, dysprosium, and terbium all declined to varying degrees, but a clear divergence signal emerged towards the weekend. Pr-Nd oxide declined continuously from the beginning of the week to Thursday, falling from approximately 763,000-766,000 yuan/mt to 752,000-755,000 yuan/mt, a cumulative drop of about 11,000 yuan/mt. On Friday, boosted by higher futures prices and favorable news, spot suppliers' willingness to sell at low prices diminished, with offers rebounding slightly. However, actual transactions followed slowly, and inquiries from downstream magnetic material enterprises remained sluggish.

[SMM Rare Earth Daily Review: Rare earth prices show divergence, Pr-Nd stronger while medium-heavy rare earths weaker] Overall, due to limited downstream inquiries, the trading atmosphere in the rare earth market was sluggish. For Pr-Nd products, offer prices edged up slightly as upstream producers held prices firm and held back from selling, but actual transaction performance was not ideal. In the short term, amid the tug-of-war and stalemate between upstream and downstream, Pr-Nd product prices are expected to move sideways in a narrow range.