China moves to create state-owned rare earths company

December 6, 2021

China has taken another step toward tightening its grip over the global supply of rare earth elements by creating one of the world’s largest rare-earths companies.

The Wall Street Journal reported that the new firm will be called China Rare Earth Group and will be based in resource-rich Jiangxi province in southern China. The company could be created as soon as this month, people familiar with the matter said. The new entity would be created by merging rare-earths assets from some state firms, including China Minmetals Corp. , Aluminum Corp. of China Ltd. and Ganzhou Rare Earth Group Co.

The combined group is designed to further strengthen Beijing’s pricing power and avoid infighting among Chinese firms, and to use that clout to undercut Western efforts to dominate critical technologies, one of the people said.

China has long dominated the rare earth industry with an estimated 55 to 70 percent of all rare earths mined in China. The country is also responsible for the processing of 85 to 90 percent of all rare earths. China’s dominance gives Beijing potential sway over makers of various fast-growing technologies.

It is unclear whether the new company will have a nationwide scope or how China’s sizable rare-earth operations in Inner Mongolia are affected by the plan.

In September, the listed subsidiary of China Minmetals said in a filing to the Shenzhen Stock Exchange that its parent was planning a strategic reorganization with Aluminum Corp. of China and the government of the city of Ganzhou, in Jiangxi province, an important center for rare-earth production. The filing didn’t provide details and said the restructuring would be subject to government approval.

The effort to consolidate the country’s position in rare earths comes at a time of increased sensitivity in the West that China could use its dominance in the industry as a geopolitical weapon.

Washington has raised concerns that Beijing could use its control of rare earths for strategic ends. In February, the U.S. Defense Department signed a technology investment agreement with Australia’s Lynas Rare Earths Ltd. , which the Pentagon called “the largest rare earth element mining and processing company outside of China.” Under the terms of the deal, Lynas will establish a light rare-earth processing facility in Texas.
At around the same time, President Biden issued an executive order naming rare-earth minerals as one of four key areas in need of more robust policy options to reduce supply-chain risks.

A White House review published in June said the U.S. should expect China to restrict exports of rare earths. It recommended numerous steps to expand domestic production and processing capacity in order “to increase the resilience of strategic and critical material supply chains.”

A senior official at Beijing’s top body overseeing government-backed companies said in an October press conference that the Communist Party would promote the restructuring of rare-earth assets, citing the need to optimize resource allocation and build “a world-class enterprise with global competitiveness.”

For more than a decade, Beijing has taken steps to consolidate mining, production, trading and export of rare-earth materials under a smaller number of state-run enterprises. It has also set production and export quotas and in 2014 consolidated the country’s rare-earths companies into six entities—efforts aimed at boosting prices and enhancing China’s strategic power in an industry that officials once complained was populated with small, scattered and disorderly enterprises.

The 2014 consolidation followed a World Trade Organization ruling in favor of the U.S., which claimed China had breached global trade policy rules by imposing export restraints on various forms of rare earths as well as tungsten and molybdenum, which Washington said had driven up prices of the metals.

Beijing has also cited environmental protection goals in the reorganization moves, since mining can destroy landscapes and unlock radioactivity.
The reorganization efforts have often coincided with weakness in rare-earth prices, based on the idea that fewer companies would limit domestic competition and boost values for the metals.



Related article search: