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China is planning to merge large parts of its rare earth industry into a global commodities giant, reports the Wall Street Journal (WSJ), citing unnamed insiders. Before the end of December, the merger of several state-owned companies is expected to create the China Rare Earth Group, based in the resource-rich Jiangxi province in the south of the country. Among others, the companies Minmetals, Aluminum Corporation of China and Ganzhou Rare Earth Group are to be involved in the consolidation.
Several media such as Bloomberg had already reported on corresponding plans in September. At the time, Chen Zhanheng, deputy head of the Association of China Rare Earth Industry, told the Chinese Global Times that the aim of the restructuring was to make rare earth mining more environmentally friendly. The WSJ, on the other hand, believes more influence on the prices of critical commodities is the government’s motive. The consolidation is expected to avoid power struggles between Chinese companies and strengthen its position vis-à-vis the West.
According to the Global Times, industry analysts expect the newly formed company to more strictly regulate production and export volumes. That could drive up rare earth prices. Shanghai Metals Market expects that the concentration of China’s rare earth industry will facilitate price stability in the future. Rapid market changes would be avoided. At the same time, it would become more difficult for upstream and downstream rare earth production companies to negotiate prices.
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