Meet China's new rare earth mega-company

China is delivering on its promise to consolidate its mining industry with the formation of a new rare earth mega miner.

According to a report by Global Times, the “mega-corporation”, named China North Rare Earths (Group) Hi-tech Co.,  will “team up” with rare earth producers in the provinces Shandong, Gansu and Sichuan. It will also “actively restructure” other rare earth companies in China’s southern provinces.

The company will be led by Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. (REHT) (SHA:600111).

The proposal to form the company is sitting with China’s cabinet and should be approved.

China has recently undertaken broad efforts to reform and consolidate its rare earth mining industry, slashing the number of mining permits in half last month. The plan to foster two or three large rare earth enterprises by consolidating local producers was announced earlier this year by Minister of Industry and Information Technology Miao Wei, says Global Times.

The move, according to industry analysts, is likely to spark new trade tensions with USA and Europe.

In March, Japan, USA and the European Union filed a World Trade Organization complaint accusing China of violating its free-trade obligations and urging the body to take actions against Beijing’s restrictions on these metals. WTO announced last month that is going ahead with the investigation on China's quotas and tariffs on rare earth minerals prompted by the three players.

China is the largest producer of rare earth metals, supplying more than 90% of the global demand for the commodities, despite holding only 30% of the world's reserves.

Australia, the USA, Canada, North Korea and other countries also have rare earths reserves, but most mining stopped in the 1990s as China impacted the market with lower-cost ores.

From these countries, North Korea is the one that seems to represent the higher threat to China’s supremacy, as it is thought to be sitting on $6 trillion worth of rare earths.

There are 17 elements that make up the group of rare earth metals. Most light rare earths have less value than heavies and are in higher demand. Heavy rare earths are the opposite with high value and smaller markets.

 

(Image courtesy of Manamana / Shutterstock.com)