Northern Rare Earth (600111.SH) – A Sleeping Giant, Stumbling Behemoth or Dangerous Weapon?

Highlights

• China’s largest rare earth producer struggles with declining profits and heavy government intervention.
• Northern Rare Earth serves as a geopolitical tool for Beijing’s economic and technological control strategies.
• Company’s future hinges on global rare earth market dynamics and potential Western supply chain diversification.

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China’s Northern Rare Earth (opens in a new tab) (北方稀土, 600111.SH) is a titan in the global rare earth industry. As the world’s largest producer of REE raw materials, the company sits at the heart of China’s strategic dominance over the sector. But beneath its seemingly solid foundation, troubling signals are emerging—profit erosion, market manipulation, and an overreliance on government support.

With its 2024 annual report expected on April 19, 2025, investors are asking: Is Northern Rare Earth still a safe bet, or is it heading toward an uncertain future?

Stock Performance: Volatile But Resilient

As of March 14, 2025, Northern Rare Earth’s stock closed at ¥23.51, up +1.03% for the day. Over the past 52 weeks, the stock has swung between ¥15.97 and ¥27.85, highlighting its volatility.

• Market Cap: ¥849.90 billion ($117B USD)
• P/E Ratio (TTM): 60.90 (Extremely high, signaling overvaluation)
• Turnover Rate: 1.49% (Indicating moderate trading activity)

Despite some institutional optimism—10 analysts recently rated it as “Buy” or “Overweight”—the reality tells a more complicated story.

Profitability Crisis: A Sharp Decline in Earnings

The numbers don’t lie: Northern Rare Earth’s profit margins are collapsing.

• 2024 Q3 Revenue: ¥249.23 billion (Down 13.5% YoY)
• 2024 Q3 Net Profit: ¥13.80 billion (Down 70.64%YoY)

A near-71% profit drop is alarming. The company has blamed global REE price fluctuations, but the real concern is China’s internal supply glut and lackluster demand from EV and high-tech sectors. Clearly, if free market forces were unleashed, this company would be done.

Even worse, while other REE players like China Rare Earth (000831.SZ) and Lynas (LYC.AX) have seen price recoveries, Northern Rare Earth continues to struggle with shrinking margins.

Capital Infusion: Smart Investment or Desperate Play?

Northern Rare Earth has announced a ¥7.33 billion investment in a wet metallurgy and inorganic functional materials pilot base to counter its earnings slide. While this move aligns with China’s push for advanced REE processing, investors should ask:

• Will this investment generate revenue? The company has stated explicitly that this project is “not for profit” but for technological development. That’s a red flag—why spend billions on a non-revenue-generating project in a high-stakes industry?
• Is it just government-driven R&D? Given China’s policy-driven industrial planning, this could be another state-backed initiative rather than a market-driven growth strategy.

Government Influence—Is this A Blessing and a Curse?

Northern Rare Earth operates under the umbrella of Baotou Steel (包钢集团), a state-owned giant. This relationship gives it:

• Preferential access to REE resources
• Government-backed financial stability
• Zero autonomy in decision-making

China’s heavy-handed control over the REE industry means export restrictions, artificial price floors, and production caps, all of which distort free-market competition. For example, China tightened export rules on key REE materials in August 2024, aiming to pressure Western chipmakers. While this benefits Northern Rare Earth in the short term, long-term investors must ask:

• Will Beijing’s interventionism backfire? Overregulation and supply disruptions may push Western nations to accelerate their own REE supply chains, reducing dependence on China in the long run. This appears to be happening with the Trump administration actively looking at acquiring Greenland, target REEs and critical minerals in Ukraine, etc.
• Will global decoupling hurt demand? The U.S., Australia, and the EU are aggressively investing in rare earth self-sufficiency. Northern Rare Earth’s pricing power could collapse if Western buyers start sourcing from non-Chinese suppliers.

Trading Signals: Is the Smart Money Leaving?

According to March 14, 2025, data:

• Main capital outflow: ¥255.88 million (2.03% of trading volume)
• Three-month trend: Consistent institutional selling despite buy ratings

March 12-13 Exception:

• Institutions bought ¥1.15 billion in stock, signaling short-term confidence
• Financing balance at ¥32.33 billion, a historical high, suggesting leverage plays

The mixed signals suggest speculative trading rather than long-term accumulation.

Some key risks to monitor:

Overvaluation Risk – A 60.90x P/E ratio is unsustainable if profits don’t rebound.

Geopolitical Risk – China’s REE export policies could spark a supply chain shift away from its dominance.

Operational Risk – High R&D spending with uncertain monetization raises concerns about profitability.

Price Manipulation Risk – The company’s stock has shown unnatural price stability despite volatile fundamentals, suggesting state intervention or institutional hedging.

Is It Worth Buying?

Investors buy if they believe in China’s long-term control over rare earths and its ability to manage global supply.

However, they sell if they think profit margins will keep shrinking and global REE diversification will hurt China’s monopoly.  Rare Earth Exchanges suggests if the U.S. develops a critical minerals industrial policy, this sell logic becomes far more potent.

Northern Rare Earth is a high-risk, high-reward play, more suitable for short-term speculators than long-term investors. Keep a close watch on global policy shifts and REE pricing trends—because one wrong move from Beijing could shatter this industry giant.

RareEarth Exchanges summarizes why Northern Rare Earth (600111.SH) continues its predominance despite less than great unfolding metrics.

Beijing’s Hidden Hand–How Much of Northern Rare Earth Does the Government Own?

Northern Rare Earth is not just another mining stock—it is a state-controlled strategic weapon in China’s rare earth dominance. The company’s largest shareholder is Baotou Steel (包钢集团), a massive state-owned enterprise (SOE) that effectively operates as an extension of Beijing’s industrial policy. Baotou Steel owns a controlling stake of approximately 40-50% of Northern Rare Earth’s shares, making it impossible for the company to act independently of government directives.

This is no accident. Beijing has structured its ownership so that rare earth resources remain firmly in state hands, insulated from foreign influence or shareholder activism. While Northern Rare Earth trades publicly on the Shanghai Stock Exchange, its operations are dictated by the State-owned Assets Supervision and Administration Commission (opens in a new tab) (SASAC), the Chinese government body overseeing SOEs.

This tight grip means:

• Decisions are not based on shareholder value but on national strategy. Profits and dividends take a backseat to China’s geopolitical ambitions.
• Regardless of market conditions, export quotas and production caps are enforced at Beijing’s discretion. This artificially controls prices to serve the government’s economic and diplomatic objectives.
• Foreign partnerships are highly restricted. Western or non-Chinese companies looking to invest in China’s rare earth sector must go through state-controlled gatekeepers, ensuring China retains ultimate control over supply chains.

How Northern Rare Earth Fits into China’s Global Strategy?

Northern Rare Earth is not just a mining company—it is a geopolitical chess piece in Beijing’s strategy to control global technology supply chains. Here’s why in a nutshell.

First and foremost, the firm supplies the majority of the world’s REEs.

China controls over 70% of global rare earth production, and Northern Rare Earth is the world’s largest single producer of raw REE materials. That means every major tech company—from Apple to Tesla to Lockheed Martin—depends on China’s supply chain to keep making semiconductors, electric vehicles, and defense technologies.

Northern Rare Earth enforces China’s export blackmail strategy.

The Chinese government can choke off supply at will by owning Northern Rare Earth. We’ve already seen this playbook:

• In 2010, China cut off REE exports to Japan over territorial disputes.
• In 2023, China imposed new export restrictions on gallium and germanium, hitting Western semiconductor manufacturers.
• In 2024, Beijing hinted at further rare earth export bans, rattling global markets.

Northern Rare Earth is the enforcement arm of these policies—Beijing’s strategic needs dictate its production quotas and pricing, not market demand.

The firm creates supply chain dependencies in China. Beijing has addicted global industries to its rare earth supply by keeping prices low and discouraging Western investment in alternative sources. This is why the U.S. and EU have struggled to build their own rare earth supply chains—China’s market manipulation makes it unprofitable for competitors to scale up.

Northern Rare Earth funds China’s military-industrial complex. Rare earths are essential for jet fighters, missile systems, and radar technology. Northern Rare Earth’s profits help fund China’s military modernization, giving the People’s Liberation Army (PLA) access to the world’s most advanced materials for weapons development.

So, according to this Rare Earth Exchanges assessment, the company is a tool for economic warfare.

For investors, Northern Rare Earth is not just a stock—it’s a state-sponsored instrument of global economic leverage. Beijing’s ownership ensures that the company’s true mission is not maximizing shareholder value but securing China’s long-term control over critical technologies. So, its primary stakeholders are the People’s Republic of China, the Communist Party of China, and, in theory, the Chinese people. Their very way of life now, to some extent, is augmented by this “publicly” traded firm.

Western governments are scrambling to break free from China’s grip on rare earths—but as long as companies like Northern Rare Earth remain government-owned and strategically deployed, Beijing will continue using rare earths as a weapon of economic coercion. It’s a chicken in the egg problem for Washington. So long as there is no industrial policy based on smart vision, strategy, and execution, more of the same will likely unfold in the short to intermediate run.