China supports major uncommon earth consolidation to balance out supply chain

China’s state resource organization has supported a significant consolidation of uncommon earth resources under different state-owned enterprises (SOEs) to form a new organization, as per a filing from one of the SOEs involved, denoting a huge advance toward the country’s efforts to optimize the management of the key resources.

The forming of the uncommon earth behemoth, supposed to be one of the world’s biggest, implies that China might enforce stricter quotas on the production and exports of these strategic resources after years of unregulated exploitation, which will assist with guaranteeing the sustainable development of the industry, examiners said.

As indicated by a stock filing published by the China Minmetals Rare Earth Co on Wednesday, the organization got a notice from its parent organization China Minmetals Corp that the State-owned Assets Supervision and Administration Commission (SASAC) has supported setting up a new organization dependent on the strategic merger of resources from organizations including China Minmetals Corp, the Aluminum Corporation of China as well as the government of Ganzhou.

The new organization will be controlled by the SASAC, the country’s state assets watchdog. Industry insiders estimate the new organization will control around 70% of China’s heavy rare-earth minerals, which is a key material in manufacturing items from high-tech consumer electronics to military equipment.

Following widespread conversations on the merger, the plan started to come to fruition toward the beginning of December, a manager of a state-owned rare-earth enterprise situated in resource-rich Ganzhou, in East China’s Jiangxi Province, told the Global Times on Wednesday, talking on condition of anonymity.

Another Ganzhou-based industry insider additionally affirmed with the Global Times on Wednesday that the consolidation is “not a secret within the industry and personnel are already in place.”

“After forming the new company, China’s rare-earth industry will shift from a scattered, small-scale status toward a systematic, comprehensive model,” Chen Zhanheng, deputy head of the China Rare Earth Industry Association, told the Global Times.

The anonymous manager said that the move intends to solidify China’s world-leading competitiveness across the uncommon earth upstream and downstream sectors.

“We expect the new company will optimize resources, ensure supply security and enforce stricter rules relating to production quantity as well as the export volume of rare earths,” the manager said.

China gives more than 85% of the world’s uncommon earths and is home to around 66% of the global supply of scant metals and minerals, as indicated by a report by the US think to tank the Center for Strategic and International Studies.

Wide implications

The consolidation comes later the Biden organization in recent months hyped the “risks of China’s threat to US supply chain” laying out gearing up uncommon earth supply as one of their focuses on climate and technological policies.

As per media reports, the US Defense Department has signed a technological investment agreement with an Australian organization, under which the last option will fabricate a light uncommon earth processing facility in Texas.

Wu Chenhui, an independent industry analyst, told the Global Times on Wednesday that the new entity won’t change its primary target of China guaranteeing the worldwide uncommon earth supplies and the nation won’t weaponize it as a diplomatic counterattack except if it is compelled to.

“But these critical resources do give China greater clout and bargaining power at the negotiation table, serving as a stern warning to any Western bullying attempts,” Wu added.

China’s uncommon earth limit has been at the center of attention during the 18-month exchange battle between the world’s two biggest economies.

In 2019, Chinese President Xi Jinping visited Ganzhou, a significant production base for uncommon earth minerals and magnets, further revealing insight into China’s ability in the uncommon earth industry from extraction, refining, and production to making downstream applications.

Industry insiders expect the restructure may drive up uncommon earth costs and domestic firms’ benefit too, helping update persisting industry issues, for example, environmental pollution and inefficient use of significant resources because of enterprises’ vicious price competition.

Uncommon earth costs have spiked since the start of 2020 when the COVID-19 pandemic broke out which prompted a global supply shortage and an extraordinary decrease in productivity.

Yet, the costs have not gotten back to the levels they came to in mid-2011, as per a Wall Street Journal report.