China’s Rare Earths Firms Rally as Fresh Industry Overhaul Looms
Producers in the biggest producer rally on hopes prices will climb
Beijing seeks ‘unified development plan’ starting from October
By Bloomberg News 1 July 2024 at 14:20
China’s rare earths producers jumped after Beijing unveiled a regulatory overhaul of the sector that could squeeze supplies and lift languishing prices of the critical minerals.
A “unified development plan” for the sector will come into force from Oct. 1, aiming to step up government oversight of the entire supply chain, two ministries said in a joint statement.
China controls more than 80% of the global production of the metals used in a range of high—tech applications, giving the nation a clout that’s long been seen as a geopolitical advantage. The industry has faced several bouts of restructuring since 2010 as authorities sought to streamline the sector to control output and exports." https://www.bloomberg.com/news/articles/2024-07-01/china-s-rare-earths-firms-rally-as-fresh-industry-overhaul-looms#:~:text=Markets,output%20and%20exports.
Analysts highlighted one aspect of the new regulations that could put pressure on Chinese output: refineries may no longer be able to use imported ores in order to produce above their government-set production quotas, they said. Imports — mostly from neighbouring Myanmar — now provide about a quarter of China’s rare earths raw materials.
“The new measures could be aimed at tackling the rare earths surplus in China,” Gwen Yang, analyst at Shanghai Metals Market, said by phone. “The new regulation could reduce China’s supply of rare earths oxides by about 20%, and that should provide support to domestic prices.”
China Northern Rare Earth Group High-Tech Ltd., the biggest listed producer, rose as much as 6.4%, while China Rare Earth Resources and Technology Ltd. surged 9%. Producers of rare earth magnets — a key manufactured product — also rallied, with JL Mag Rare-Earth Ltd. advancing 8.6%. Outside of China, Lynas Rare Earths Ltd. gained 4%.
China’s rare earths sector is already tightly regulated, with companies subject to quotas for extraction and exports. Beijing has also led waves of consolidation in the industry, establishing China Rare Earth Group Ltd. in 2021 through the merger of several key producers.
More Punishment,
The latest plan envisages a system for full traceability of rare earths along the supply chain, with clearly defined responsibilities for which companies are allowed to do what. It also includes a fresh bid to crush illegal mining or trading — a persistent bugbear for authorities even after years of crackdowns.
Offenders will face fines of up to 10 times the monetary gains from illegal businesses, double what was included in an initial draft. It widens the scope of company personnel who can be charged.
“There are still some prominent problems in China’s rare earth management,” the government statement said. “The punishment for illegal mining and smelting separation, as well as the buying and selling of illegal rare earth products, are insufficient.”
Over the past three decades, China has built a dominant role in mining — and especially in refining — of rare earths, a cluster of 17 elements that are vital to high-tech manufacturing and the green energy transition.
Deng Xiaoping stressed the country’s edge in this resource in 1992, saying that “the Middle East has oil, China has rare earths.”
— With assistance from Annie Lee, Ying Tian, and Jake Lloyd-Smith
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