On December 6th, according to media reports, “China has approved the establishment of the world’s largest rare earth group. This move aims to maintain its dominant position in the global supply chain of rare earths. The new rare earth company will be named the group and will be established in Jiangxi Province as soon as this month.” The relevant person told the media that the news of establishing China Rare Earth Group is true, with Ganzhou Rare Earth Group as one of the constituent units.
First of all, let’s talk about rare earths. Rare earth elements are widely used in industrial catalysts, camera lenses, automotive batteries, mobile phone screens, LEDs, computers… Previously known as industrial vitamins, they are now closely related to new materials.
Taking IC as an example, transistors, resistors, capacitors, diodes, and so on all require rare metals (extracted from rare earths). It can be said that modern industry cannot do without them, and high-tech manufacturing industry also cannot do without them.
From the perspective of rare earth reserves, China’s rare earth reserves in 2015 were 55 million tons, accounting for 42.3% of the world’s total proven reserves, and it is also the only country that can provide 17 types of rare earth metals.
China Rare Earth Group is about to be established, and the semiconductor market may usher in a new situation
The data is sourced from the United States Geological Survey and mapped by OFweek Wikipedia
In terms of rare earth production, China’s rare earth production in 2015 was 105000 tons, accounting for 87.5% of the world’s total production.
China Rare Earth Group is about to be established, and the semiconductor market may usher in a new situation
NA indicates no production.
The data is sourced from the United States Statistical Network and mapped by OFweek Wikipedia
China’s rare earth industry is undoubtedly the world’s number one in terms of reserves, production, and variety richness. It can be said that at present, most countries in the world’s industry and manufacturing cannot do without China’s rare earth industry. Does this mean that China’s rare earth industry, like foreign oil and iron ore, has proper bargaining power? On the contrary, China’s rare earth industry has long been in a stage where there is no bargaining power.
The answer lies in the “past life and present life” of rare earths in China:
Backward refining technology
In the 1960s, China’s rare earth related extraction and separation technology fell behind, leading to a situation where rare earth minerals could only be exported at low prices and rare earth products could only be imported at high prices. It was not until the 1970s that a group of researchers, including Xu Guangxian, the “father of rare earth in China,” focused on rare earth purification technology and used extraction method technology to break foreign technological monopolies that China mastered rare earth purification related technologies.
Environmental damage and price wars
Since the 1990s, a large number of local and private enterprises have flooded into the rare earth industry, with some even illegally mining rare earth minerals, causing shocking environmental damage. From 1990 to 2005, China’s rare earth exports increased tenfold, accounting for 80% of the world’s total exports; Export prices have decreased by 36%. The underlying reason is that a large number of enterprises engage in price wars with each other, clearly occupying the initiative of the seller’s market but selling the “cabbage price”
Regulatory intervention
Since 2000, China has implemented a mining quota system for rare earths, which is distributed to provinces or enterprises. Mining beyond the quota has become illegal, while restricting the issuance of new mining licenses. Starting from 2005, the export tariffs on rare earth products were raised and some export tax refunds for rare earth products were cancelled or lowered. In 2007, rare earths were listed in the “2007 Catalogue of Prohibited Commodities for Processing Trade”; In 2009, the Ministry of Industry and Information Technology formulated the “Special Plan for the Development of Rare Earth Industry (2009-2015)”, during which the total amount of rare earth export quotas was controlled to be within 35000 tons per year.
Until 2021, the Daily Economic News reported that Ganzhou Rare Earth Group would join the establishment of the “New Central Enterprise” China Rare Earth Group as one of the founding units.
So what benefits will the establishment of China Rare Earth Group bring?
Overall benefits for production efficiency, rare earth resources, and environmental protection in the rare earth industry
Further integration of the rare earth industry, using scale to improve production efficiency, while reducing costs, further eliminating outdated production capacity, such as heavily polluting production capacity; Unified management is conducive to coordinating production regulation and enhancing risk resistance; In terms of price regulation, both advance and retreat are consistent, increasing external bargaining power while stabilizing domestic rare earth prices. In terms of environmental protection, rare earth elements, as an important component of new energy technology after integration and coordination, can participate in the large-scale market of China’s energy consumption shifting towards clean energy, which can better leverage economies of scale.
It has reference significance for other bulk commodities
