The State Council has Given Official Reply with Respect to the Rare Earth Conglomerate Proposal, and Six Major Groups are About to be Revealed

The long-planned rare earth conglomerate proposal has finally been released. Recently Economic Information Daily learned exclusively from authoritative sources that the rare earth conglomerate proposal which the Ministry of Industry and Information Technology has taken the lead in formulating has recently been approved by the State Council, and a structure of “1+5” based on the proposal will be established, including the Northern Rare Earth Group established by Baotou Steel Rare Earth (Group) Co., Ltd., the two central enterprises China Minmetals Corporation and China Aluminum Corporation that were already engaged in the rare earth industry several years ago, and three local rare earth groups, namely Ganzhou Rare Earth Group, Guangdong Rising Nonferrous Metals Share Co., Ltd. and Xiamen Tungsten Co., Ltd.

Centering on large groups to construct an entire rare earth industrial chain, really change the fragmented situation of rare earth for the past few years, and obtain international competitiveness is undoubtedly an important blueprint that the state is pursuing. Moreover, the rare earth industry will also become a “example” of our country's valuable mineral resources integration. It is worth noting that, based on what Economic Information Daily learned from multiple industrial sources, in order to better increase the industrial concentration level and materialize a rare earth industrial structure led by large enterprises, a series of policies covering production quota, directive plan and new mining license will in general favor large groups.

“The State Council held the meeting in late December of 2013, in which the rare earth large group proposal was discussed and approved in principle. Currently the written official reply has been sent to the Ministry of Industry and Information Technology, and it is expected to be officially announced soon.” One of the above-mentioned sources told Economic Information Daily. He revealed that the currently approved conglomerate proposal is actually an overall development framework to promote the healthy growth of the rare earth industry, aiming to increase the concentration level of the industry, build a rational rare earth industrial development structure, and hence realize the protection and rational exploitation of rare earth resources based on efforts led by existing key enterprises involved in the rare earth business.

The source also disclosed that the approval of the proposal is just to start the rare earth integration efforts. Based on the authorization from the State Council, the Ministry of Industry and Information Technology will activate a series of approved work activities. And the above-mentioned rare earth enterprises that have been included into the list of large groups will need to prepare detailed establishment plan and submit to the Ministry of Industry and Information Technology, and they will be admitted as one of the rare earth conglomerates only after obtaining the approval.

“Basically, large rare earth groups will have a series of policy support from the state, and the integration to be started later will center on the above-mentioned large rare earth groups with the focus on domestic upstream enterprises dealing in raw ore, smelting and separation, which means that large groups will have more rare earth resources advantages,” a source close to the Ministry of Industry and Information Technology told the reporter. In addition to obtaining policy support in integration and development, Economic Information Daily also learned from authoritative departments that the six large rare earth groups to be included in the list of rare earth conglomerates will assume the responsibility of integrating their local rare earth enterprises and optimizing resources, such as integrating fragmented smelting and separation enterprises within the region, while at the same time carrying out capacity reduction and environmental improvement according to the requirements of industrial policies.

“ In fact we have been conducting local integration. Next step we need to put more money and efforts on local integration, and will have to regulate the production capacity even after the integration, including the reduction of some backward capacity. Based on our past experience, as it involves a game of many interests, we expect to face a major challenge,” the head of a large rare earth enterprise told Economic Information Daily frankly.

It is learned that the six major rare earth groups included in the list of the rare earth conglomerates are mainly located in key rare earth production areas like Baotou of Inner Mongolia, Ganzhou of Jiangxi, Guangdong and Fujian. Economic Information Daily learned that, different from the group integration approach using available resources conducted by local state-owned enterprises such as Baotou Steel Rare Earth, Guangdong Rising Nonferrous Metals, Ganzhou Rare Earth and Xiamen Tungsten, it will not be easy for the two central enterprises to win the battle of supremacy in rare earth. While having no access to upstream resources, the central enterprises will normally adopt the “ penetration ” approach when getting involved with the ionic rare earth industry in the south, that is, through acquiring and restructuring the downstream smelting, separation and deep processing industry, gradually penetrate the upstream industry.

China Minmetals Rare Earth Co., Ltd., a subsidiary of China Minmetals Corporation, was established in October 2008 with a registered capital of RMB837 million. Currently it has an annual smelting and separation capacity of 14,000 tons rare earth, which is the biggest in the south. On the other hand, China Aluminum Corporation has set up China Aluminum Rare Earth (Jiangsu) Co., Ltd., focusing its integration efforts on downstream rare earth enterprises within Jiangsu province, while gradually penetrating the upstream to obtain rare earth resources.

The approval of the proposal is almost three years from 2011 when the State Council promulgated Several Opinions of the State Council on Promoting the Sustainable and Healthy Development of the Rare Earth Industry, which expressly required that a rare earth industrial structure led by large enterprises be basically formed within one to two years.