Indeed, a smaller number of big Chinese rare earth metals companies, which already dominate the world’s production of the metals, should have more bargaining power to negotiate prices with foreign buyers. The central government also began to consolidate many of China’s rare earth metals companies, first into six big SOEs and now, with the recent merger, four of them.īeijing believes that less corporate competition and more state control will enable it to gain greater control over rare earths prices. Unfazed, Beijing pivoted from export quotas to output quotas. But after an international protest was lodged against the quotas, the World Trade Organization struck down their use in 2014. In a bid to boost prices, Beijing imposed export quotas on rare earth metals in 2009. In fact, intense competition among private Chinese companies depressed rare earths prices during much of the first two decades of their global dominance. Unfortunately for Beijing, the structure of China’s rare earth industry had long been highly fragmented, making it difficult for Beijing to influence prices. That ability is clearly a priority for China’s Ministry of Industry and Information Technology (MIIT), whose chief, Xiao Yaqing, complained that “China’s rare earths aren’t being sold at a ‘rare’ price but sold at an ‘earth’ price.” But for Beijing, assurance of “the stability of production and supply chains” amounts to more than control over the physical production of rare earth metals it also means the ability to influence their prices, much like the way the OPEC cartel tries to manage the price of oil. Yet, China’s official framing of the rare earths industry consolidation sounds innocuous: to assure “ the stability of production and supply chains”-a goal that Beijing seems to have long since achieved given Chinese dominance over worldwide rare earths production since the 1990s. Echoing that view, China’s state-run media has repeatedly lauded the usefulness of the industry as leverage in China’s disputes with Western countries, particularly the United States. And certainly, Beijing views its rare earths industry as being strategically important, as Chinese General Secretary Xi Jinping himself noted in 2019. The effort is one of several that Beijing has pursued to gain greater control over industries that it sees as having strategic importance, from defense and energy to technology and telecommunications. The new company, reportedly named China Rare Earth Group, is the latest product of a decade-long effort by Beijing to consolidate China’s rare earths industry. The merger created the world’s second largest rare earths producer, accounting for 30 percent of China’s total rare earth metals production and 60-70 percent of its heavy rare earth metals production. What’s more, in December 2021, Beijing approved the merger of three of China’s biggest rare earth metals state-owned enterprises (SOEs)-China Minmetals Rare Earth, Chinalco Rare Earth & Metals, and China Southern Rare Earth Group-along with two other companies-Ganzhou Zhonglan Rare Earth New Material Technology and Jiangxi Ganzhou Rare Metal Exchange. Over the past year and a half, their prices have risen to levels not seen since their peak in 2011. Rare earth metals or “rare earths,” a collection of 17 elements that are valued for their conductive and magnetic properties, have made headlines again.
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