China integrates the rare earth market, and the State-owned Assets Supervision and Administration Commission approved the merger of three companies engaged in rare earth mining. In this way, three of the world’s six largest rare earth production companies belong to the consortium. Overall, China controls more than 80% of the rare earth market.
There are three companies in the new consortium: China Minmetals Rare Earth Group, China Rare Earth Co., Ltd. and China Southern Rare Earth Group.
It is reported that the merged company will be named China Rare Earth Group Co., Ltd., responsible for the mining and processing of rare earth mines in the southern region. Another large group company, China North Rare Earth Group, as the name suggests, is responsible for the development of minerals in the north. The new consortium shares, the SASAC owns 31.21% of the shares, and the other three companies each control 20.33% of the shares.
Rare earth metals are 17 fairly rare chemical elements that are used in the production of any modern electronic products and equipment, from smartphones and computers to bicycles and fighter planes. The problem is not just that there are few rare earth reserves on the earth, but that it is difficult to extract them. China is concentrated with world-class rare earth minerals, about 36 million tons, or about one-third of the world’s reserves. However, China’s competitive advantage is precisely the mastery of effective extraction and processing technology. At the end of the 20th century, the United States was the main supplier of this product. However, from a safety and ecological point of view, the mining and processing of rare earths is a very complicated process. At present, the only source of raw materials in the United States-California Mountain Pass Rare Earth Mine, also transports its raw materials to China for reprocessing.
In this way, China has almost become a monopoly in the field of rare earths. 80% of the demand for this product in the United States comes from imports from China. With the deterioration of Sino-US relations, Washington has repeatedly mentioned the need to establish an independent supply chain that bypasses China. But the problem is that it is impossible to “return to the old business” in the short term.
Mei Xinyu, a researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce of China, believes thatIn the context of globalization and international division of labor, it is more effective to rely on suppliers who have the necessary competitive advantages. In terms of supply chain, the idea of being fundamentally independent of China is not correct.
He said: “I think this idea is inherently problematic. In the future, China and the United States should continue to develop in the direction of long-term, equal and mutually beneficial cooperation as trading partners, and should not be too much political considerations. At present, it is mainly upstream. The increased concentration of resources, production and exploitation of some rare earth species does not mean that it will monopolize downstream finishing and other links. Moreover, the merger of upstream also means a monopoly on the global market, because China’s rare earth resources account for only 30% of the world’s. Even if the output value of rare earth separation and purification in our country is relatively high, a considerable part of the demand needs to be imported. In addition, China is the world’s largest exporter, and we attach great importance to our credibility. I personally think it is not necessary to take this issue too seriously. After politicization, we must believe in China’s commercial credit.”
Western experts believe that the purpose of China’s establishment of a rare earth consortium to consolidate the market is to better control the price of rare earth products.
But expert Mei Xinyu believes thatThe new consortium is mainly engaged in primary mining, and its purpose is to strengthen compliance with ecological regulations.The divided market is difficult to control. Small mining companies have poor capabilities and the environment causes greater damage.
He said: “I think one of the main reasons for the integration is to promote economies of scale and environmental protection in the mining and separation and purification of rare earths. Although China was ahead of the world in terms of rare earth purification technology, the mining process was relatively scattered, resulting in Enterprises have adopted a large number of mining methods that are more harmful to environmental pollution. The production capacity of the three enterprises involved this time is mainly concentrated in the mining of rare earths. Through the integration of resources, they can achieve large-scale production and clean mining methods, which will drive economies of scale and Double income generation with environmental benefits.”
What needs to be understood is that the main business of enterprises within the framework of the consortium is to operate heavy rare earths. At the same time, the United States, Australia and the United Kingdom resumed processing industries, mainly light rare earths. This means that China will also play a key role in the supply of certain precious resources.
On the other hand, after the COVID-19 crisis, the world economy and industry gradually recovered. Correspondingly, the demand for rare earth resources is also increasing. Among them, the annual prices of dysprosium and terbium have risen by 60% and 90%, respectively. Furthermore, as the world’s second largest producer of rare earths, Myanmar’s political situation is unstable, and China needs to meet the world’s demand for rare earths on its own. China is also willing to complete this task.
Contrary to the concerns of Washington and other countries, it is important for Beijing to maintain its position as a reliable supplier. According to the new five-year plan starting in 2020, China’s rare earth mining quotas are increasing every year. In 2020, the mining volume will reach 140,000 tons, and this year will increase by another 20%.Return to Sohu to see more
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