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[Asia Economy Beijing=Special Correspondent Jo Young-shin] The strategic alliance between the largest rare earth companies in northern and southern China marks the beginning of a realignment in China's rare earth industry. The controversy over the weaponization of China's rare earth resources is expected to intensify.

rare earth elements

According to Chinese media including the state-run Global Times on the 21st, Northern Rare Earth Group (hereinafter Northern Rare Earth), the largest rare earth company in China, has formed a strategic partnership with China Rare Earth Group (China Rare Earth).

Northern Rare Earth is the largest rare earth producer in northern China. China Rare Earth is a key rare earth company in southern China and is currently preparing for a merger among Okwang Rare Earth, China Aluminum, and Southern Rare Earth Group. This means the largest rare earth companies in northern and southern China have joined hands.

China Rare Earth is known to mainly produce heavy rare earths needed for motors, a core component of electric vehicles. On the other hand, Northern Rare Earth mainly produces light rare earths.

The combined rare earth production of these two corporate groups is said to account for 90% of China's total output. This has raised concerns that global rare earth mining, refining, and trading are effectively controlled by these two Chinese companies.

Both parties agreed to expand China's rare earth industry chain and pursue mutual benefits. Northern Rare Earth stated regarding this strategic partnership, "We will cooperate on rare earth mines in the north and south," adding that through this cooperation, they will advance the rare earth industry chain including mining, refining (processing), and export.

The Chinese government has also supported these rare earth companies. Chang Guowu, Deputy Director of the Ministry of Industry and Information Technology of China, said at a rare earth industry forum held in Shanghai the day before, "We will support Chinese companies in taking the lead to form innovation alliances," and "We will ensure stable supply of rare earths by expanding exploration of rare earth deposits." He added, "China is the world's largest rare earth mining, refining, and trading country with abundant rare earth resources and a complete industrial system," emphasizing the need to unite efforts to become a rare earth powerhouse through technological innovation.

Rare earths, called the "industrial vitamin," are essential materials used in cutting-edge industries such as hard disk drives, electric vehicle motors, aircraft, and missiles. China holds a significant influence with a 70-80% share of the global market. Following the merger of three rare earth-related companies and the strategic alliance between the largest rare earth companies in northern and southern China, China's influence over rare earths is expected to grow further.

There is a prevailing expectation that China will attempt to weaponize rare earths to counter the U.S.-led global semiconductor supply chain. In fact, rare earths are classified as strategic materials under China's Export Control Law. The National People's Congress (NPC) passed the Export Control Law last October, providing a 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.

Chinese media Fenghuawang reported in an article about the merger of rare earth companies that Chinese companies' influence will increase and that China will control the international pricing of rare earths. Fenghuawang explained that as of last year, the global rare earth reserves are estimated to reach 120 million tons, with China's reserves accounting for 44 million tons. Considering refining capacity, China holds a 90% market share in rare earths.

The media particularly linked China's rare earths to the Sino-U.S. conflict, openly stating that the rare earth company merger targets the U.S. and Western countries. It pointed out that although rare earths are important strategic resources for the U.S. and Western countries, the U.S. and Europe have held pricing power so far, while China has sold rare earth minerals cheaply.