China Rare-Earths Pact Spurs Speculation of Bigger Consolidation

By Bloomberg

Dec 20, 2021

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A tie-up between two rare-earths companies is throwing a spotlight on China’s efforts to build industry giants to gain better pricing power in global markets.

(Bloomberg) -- A tie-up between two rare-earths companies is throwing a spotlight on China’s efforts to build industry giants to gain better pricing power in global markets.

China Northern Rare Earth (Group) High-Tech Co. announced over the weekend an agreement with China Rare Earth Holdings Ltd. to cooperate in mining, trade and deep processing operations. Shares of China Rare Earth soared as much as 15% in early trading Monday, while China Northern climbed as much as 4.5%.

While the cooperation pact included few specifics, it’s raising speculation of further restructuring in the industry. That will be in focus as a rare-earths industry forum kicks off in Baotou, China, on Monday.

The government has been restructuring the industry for years, seeking to consolidate all its rare earth miners and processors into two huge firms, one in the north and one in the south. China hopes to maintain its dominance in the production of the strategic metals, of which it controls 70%, as the U.S. and Europe look to develop their own production and supply chains and diversify away from China.

The importance of the materials, ubiquitous across a range of applications from consumer goods to military gear, was highlighted in 2019 as China considered whether to use its dominance as a counter in the trade war with Washington.

Demand for rare earths is rising, driven by growing need for permanent magnets, which include the NdFeB variety, found in everything from phones to computers to cars. Prices of neodymium and praseodymium, -- two of the 17 rare earth elements that are used in NdFeB magnets -- surged to the highest in a decade earlier this month.

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