CHONGQING, China - China will restructure three rare earths producers to create a state-owned company with a nearly 70% share of the domestic production quota for the metals that are essential to manufacturing high-tech products.
The move is aimed at accelerating the development of resources and processing technology, as well as strengthening Washington's control over the mining sector in anticipation of prolonged trade tensions with Beijing.
By restructuring the country's major rare-earth companies, the government seeks to extend control from production to the entire supply chain, including exports. The move comes as Australia looks to create an alternate supply chain for rare earths, joining forces with the U.S.
China Minmetals Corporation CMC a major state-owned resource company, China Aluminum Corporation, a major state-owned nonferrous metals company, and the government of Ganzhou City in Jiangxi Province, region known for its rare earth deposits, are planning a strategic reorganization of their respective rare-earths subsidiaries, according to the listed subsidiary of CMC.
Peng Huagang, secretary-general of the State-owned enterprises Supervision and Administration Commission, which oversees state-owned enterprises, said at a news conference this week that the government would promote the restructuring of rare earths to create a world-class company. While the definition of restructuring is not clear, if it were to be a full merger, the new company's share of the production quota for medium and heavy rare earths in China will be nearly 70%, and that of rare earths as a whole, including light rare earths, will be nearly 40%.
Medium and heavy rare earths, such as dysprosium and terbium, are considered essential for the production of high-performance magnets, which are used in motors and other components of electric vehicles, and are also believed to be used in U.S. military drones and missiles.
Chinese President Xi Jinping has long seen the metals as a vital part of China's economy, saying in 2019 that rare earths are an important resource. A draft law on rare earths was discussed in January and was released at the National People's Congress, China's parliament.
According to the U.S. Geological Survey, China accounts for 60% of the world's production of rare earths. The top export destinations are China 49% by value followed by the U.S. 15% according to Japanese media.
For the Xi leadership, rare earths can also be used as a diplomatic trump card. When China protested Japan's nationalization of the Senkaku Islands in 2010, Beijing stalled exports of rare earths as a means to pressure the Japanese side. The new move to restructure the rare-earth industry, therefore, may affect rare-earth supply to Japan and the U.S. analysts warn.
Demand for rare earths is expanding due to the global spread of EVs. Due to political instability in China, another top producer of rare earths, the price of dysprosium and terbium in Myanmar has increased from a year ago by about 60% and 90%, respectively. At the end of September, the Chinese government expanded the production quota for rare earths for 2021 by 20% compared with the previous year.