Chinese public funds have poured in, and investment in the rare earth industry chain has soared, but there is a gap in downstream IPOs (Morgan Stanley)
A Morgan Stanley report pointed out that rare earths, as key materials for electric vehicles, national defense, and offshore wind power, have soared in price driven by China’s export controls, attracting a large amount of capital.
A Morgan Stanley report pointed out that rare earths, as key materials for electric vehicles, national defense, and offshore wind power, have soared in price driven by China’s export controls, attracting a large amount of capital. In 1Q26, funds focusing on rare resources received a net inflow of US$2.5 billion, and the average annualized return of related funds reached 61%. More than 50% of the capital in the private equity market flows into mergers and acquisitions, and the industry chain is becoming mature. However, IPO activities are still concentrated on upstream exploration, and there is a serious shortage of public listing targets in downstream magnetic materials, recycling and other links. The market is enthusiastic about the "resource" properties of rare earths, but may not pay enough attention to the investment opportunities and IPO gaps in downstream high value-added links. One sentence conclusion: Rare earth theme investment is unprecedentedly popular, but more capital flows to the resource end, and there are more certain investment opportunities in downstream technology links (magnetic materials, recycling). Positive/negative: Positive for upstream leaders such as Lynas Rare Earths (LYC.ASX) and MP Materials (MP.US), as well as downstream private companies such as Niron Magnetics and Cyclic Materials. The market is highly optimistic about upstream resources, but the value of downstream technology routes and recycling links may be seriously underestimated. Catalysts: 1) Further developments in China’s rare earth export control policy; 2) IPO progress of downstream magnetic materials and recycling companies; 3) Implementation of the G7 countries’ supply chain diversification plan.