China Cements Rare Earths Dominance With New Global Giant
China Cements Rare Earths Dominance With New Global Giant
(Bloomberg) -- China formed a rare-earths giant by merging some key producers, creating a behemoth that will strengthen its control over the global industry it has dominated for decades.
The group is formed through merging rare-earth units of government-owned companies including China Minmetals Corp., Aluminum Corp. of China and Ganzhou Rare Earth Group Co., according to a stock exchange filing from China Minmetals Rare Earth Co. The new entity, China Rare-Earths Group, will speed the development of mines in the south, state broadcaster CCTV reported.
Bloomberg News reported in September that China was planning to create two giants -- one in the country’s north and the other in the south, each focusing on a different subset of materials. China controls most of the world’s mined output of rare earths, a broad group of 17 elements that are used in everything from smartphones to fighter jets, and has a stranglehold over processing.
The move aims to better allocate resources, realize green development and upgrade deep-processing of the rare-earth sector, according to CCTV. The State-owned Assets Supervision and Administration Commission will hold a 31.21% stake in the new group, while Chinalco, China Minmetals and Ganzhou Rare Earth Group will each own 20.33%, it said.
“This is part of a broader repositioning of Chinese industry to feed the supply chain for the coming years of electrification, and it’s a recognition that the supply chain is the key tool for success in the coming decade,” said Jim Litinsky, the CEO of MP Materials, which is the only U.S. producer of rare earths. “It’s great for the business in the sense that I think the West is increasingly realizing that there needs to be an integrated localized supply chain.”
China Minmetals Rare Earth surged as much as 8.5% in Shenzhen and Aluminum Corp. of China Ltd. gained more than 5% in Shanghai.
The country’s dominance of the sector has been an increasing concern. The little-known materials were thrust into the spotlight in 2019 when China considered export controls as part of its trade war with the U.S., which relies on the country for 80% of its imports. While ultimately no restrictions were ever implemented, it highlighted the risks of being dependent on one country and spurred a raft of announcements from Western economies pledging to boost their rare-earths independence.
The latest round of consolidation follows restructuring efforts by Beijing that created six licensed groups in 2016. The government also controls production, granting annual quotas to the firms. This year’s volume has been set at 168,000 tons.
Rare earth prices have surged this year as demand outpaced supply, while a power shortage exacerbated disruptions and a broad rally in commodity prices increased production costs. Neodymium and praseodymium -- two elements used in permanent magnets -- have jumped to the highest in a decade.
“The new boom cycle is about the fact that in EV we’re going from low single-digit penetration to all vehicles in decades, so the amount of scale needed to be successful is enormous,” Litinsky said.
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With assistance from Bloomberg