China consolidates REE industry

China's largest rare earths producer, the Inner Mongolia Baotou Steel Rare Earth Group, has bought nine regional mining companies, Reuters reports.

The move is part of China's plan to consolidate its rare earths industry – which accounts for more than 90% of the world's supply.

Boutou will received 51% stakes in each company at no cost.

According to state media, this is part of a "long-awaited scheme" of consolidation. The government has encouraged six companies – including Baotou Steel – to "integrate regional resources to improve industrial concentration."

"The large rare earth groups will get preferential polices to better develop the mineral resources, such as production quota, mandatory plan, mining license," Xinhua reports.

REE companies will also have to submit reorganization plans to the Ministry of Industry and Information Technology.

The move comes during a troubling time for China's rare earths industry: Illegal mining and smuggling of the metals have led to a major government crackdown.

According to Xinhua, 14 illegal mines have been shut down over the past two years.

In November, smugglers attempted to take 130 tonnes of rare earth products valued at $2.3 million dollars out of China.

High levels of smuggling have adverse effects on China's ability to control prices.

As the world's biggest producer by far, China has near-complete control over REE pricing. In its most recent export quota announcement the Ministry of Commerce slightly lowered rare earths quotas to a total of 15,110 tonnes for 2014.

The People's Republic identified 28 producers to share the quota.

China's monopoly over REEs has not gone unnoticed by the international community. The World Trade Organization (WTO) recently ruled that China's export restrictions on rare earth metals were not compliant with the organization's regulations. China has rejected the ruling and is planning an appeal.