Incorporation Proposal for China Northern Rare Earth Group Is Preliminarily Completed

New headways have been made in the northsouth consolidation of China’s rare earth industrywhich has attracted broad attention. On March 14, the reporter learned from the Inner Mongolia Commission of Economy and Information Technology that the Incorporation Proposal for China Northern Rare Earth (Group)Hi-tech Co., Ltd. (exposure draft) formulated by the commission and enterprises concerned had been submitted to the Ministry of Industry and Information Technology (MIIT), and the MIIT gave a reply, approving, in principle, the incorporation steps put forward in the proposal.Under the incorporation proposal, the main resource involved in the consolidation is light rare earth in the northern part of China. Inner Mongolia Baotou Steel, which will play a leading role, teams up with Gansu Rare Earth Group and key enterprises from Sichuan,Jiangxi and Shandong to set up China Northern Rare Earth (Group) Hi-tech Co., Ltd. The statecontrolled company will attract diversified investment, stick to total control and inventory optimization, implement the strategy of large enterprise and large group at a faster pace, actively press ahead with technological innovation, improve mining, smelting and application technologies, and eliminate backward production capacity to further improve industry concentration.

The incorporation proposal makes it clear that after consolidation the enterprise group will draw upon the three iron ore dealers’ models,and implement multinational operations, to preliminarily establish order for the development of rare earth resources, smelting separation and market distribution in the northern region, and facilitate the formation of industry layout dominated by large enterprises.

The MIIT put forward the following opinions on the incorporation proposal: support the incorporation of China Northern Rare Earth Group as soon as possible, with Bao Steel Group playing a leading role, but the new group should reflect the state’s control power and have a reasonable equity structure, and how to optimize its asset structure requires further research; in principle, the MIIT approves the incorporation steps put forward in the proposal: Difficult steps should follow easy steps,i.e. enterprises in Inner Mongolia should be consolidated first, and then they should team up with enterprises from other regions.

Industry experts point out that after the U.S.,Japan and the EU announced they would file complaints with the WTO against China’s restricting rare earth outputs, consolidation in China’s rare earth industry will draw more attention. In experts’ view, actively promoting reorganization of the rare earth industry is an effective approach to improve management in China’s rare earth industry. The difficulty faced by Inner Mongolia in playing a leading role to set up China Northern Rare Earth (Group) Hitech Co., Ltd. lies in how to balance all stakeholders’ interests. In the current consolidation of rare earth enterprises, the issue of inconsistent criteria for shutting down backward production capacity has surfaced. The best solution is cross-shareholdings between central enterprises, and between central enterprises and local enterprises; through shareholding approach, local enterprises, including private enterprises, should be attracted to take part in consolidation, so as to improve economies of scale.

It is learned that, pursuant to requirements of the MIIT and the National Rare Earth Office,the Inner Mongolia Commission of Economy and Information Technology is stepping up efforts to improve the incorporation proposal for China Northern Rare Earth Group, sum up the consolidation of rare earth upstream enterprises in the autonomous region, and report to the People’s Government of Inner Mongolia Autonomous Region.