Chinese Rare Earth Companies Begin Mergers in Earnest...Countering US Global Supply Chain Establishment

Rare Earth Weaponization... China Controls Over 70% of Global Market
Production and Export Adjustments Expected... Price Uptrend

[Image source=Reuters Yonhap News]

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China has played the card of merging rare earth-related companies to counter the U.S.-led global semiconductor supply chain construction. Rare earths, called the "industrial vitamin," are key materials used in cutting-edge industries such as hard disk drives, electric vehicles, aircraft, and missiles. Given that China holds a 70-80% share of the global market, there is expected to be controversy over resource weaponization.

According to Chinese media including the state-run Global Times on the 6th, the merger of three state-owned mining and mineral enterprises?China Minmetals, Aluminum Corporation of China Limited (Chalco), and Ganzhou Rare Earth Group?is entering the final countdown.

Chinese media reported that the merger of the three companies has already been approved by authorities and that the new legal entity will be launched within this month. They emphasized that the scale of the new merged company will be mammoth. This is interpreted as China intending to hold the price-setting power for rare earths. The merged company will be named China Rare Earth Group, and its headquarters will be established in Jiangxi Province.

Chen Li, chief analyst at China Chuanchai Securities, explained, "If the merged company is successfully launched, it will account for 70% of China's annual rare earth mining volume," adding, "The merged entity will become the world's largest rare earth-related company."

Wang Guoqing, director of the Beijing Langer Steel Research Center, expressed confidence, saying, "Once the merger of the three companies is completed, China's dominance over rare earths will become even more solid," and "China's influence in the international market will grow further." He also added that the international prices of rare earths have been set too low so far.

Chinese media forecast that once the merged company officially launches, it may limit rare earth production for environmental protection reasons, which could also lead to some adjustments in exports.

Chinese media Fenghuawang reported that the influence of Chinese companies in the rare earth market will increase, and China will control the international price-setting power for rare earths. Fenghuawang explained that as of last year, the global rare earth reserves are estimated to reach 120 million tons, of which China's reserves amount to 44 million tons. Considering the refining scale, China holds a 90% market share in rare earths.

The media particularly noted that the merger of Chinese rare earth companies is intertwined with Sino-U.S. conflicts and did not hide that this merger targets the U.S. and other Western camps. They pointed out that although rare earths are important strategic resources for the U.S. and Western countries, the U.S. and Europe have held the price-setting power so far, while China has sold rare earths, a rare mineral, at cabbage prices.

Since rare earths are strategic materials included in China's Export Control Law, the dominant analysis is that China is highly likely to use rare earths as a resource weapon. The National People's Congress (NPC) passed the Export Control Law last October, which provides the legal basis to restrict or prohibit the export of military and other goods to protect China's national interests and security. At that time, Chinese media stated that the Export Control Law would serve as a legal basis and tool to respond to repeated U.S. sanctions against China.

Some in China expect that once the merged company officially launches, rare earth prices within China will generally rise. It is reported that prices of some rare earths, such as praseodymium-neodymium oxide, have already been on an upward trend since October.