China’s rare earths producers are seeing a major boom after Beijing announced a sweeping regulatory overhaul aimed at tightening control over the sector.
Bloomberg said that this step is expected to restrict supplies and increase the prices of these important metals.
Starting next October 1, a “unified development plan” will be implemented to strengthen government oversight of the entire supply chain, according to a joint statement issued by the Ministry of Industry and Information Technology and the Ministry of Natural Resources.
China, which controls more than 80% of global production of these minerals essential for various high-tech applications, sees this regulatory move as a way to maintain its geopolitical influence, according to Bloomberg.
restructuring
China’s rare earth industry has undergone multiple restructurings since 2010 to simplify production and control exports.
One key aspect of the new regulations that analysts believe could impact production is restrictions on refineries using imported crudes to exceed government-set production quotas, Bloomberg said.
Currently, imports primarily from Myanmar contribute about a quarter of China’s rare earth raw materials, according to the same source.
“The new measures could be aimed at addressing China’s surplus of rare earths,” Guojun Yang, an analyst at Shanghai Metals Market, told Bloomberg. “The new regulation could reduce China’s supply of rare earth oxides by about 20%, which should provide support to domestic prices.”
Market response
Following this announcement, China Northern Rare Earth Group Hi-Tech, the largest listed producer, saw its shares rise by 6.4%, while China Northern Rare Earth Resources & Technology rose by 9%.
Shares of GL Rare Earth, a producer of rare earth magnets, rose 8.6%, according to Bloomberg. Internationally, Lynas Rare Earth shares also rose by 4%.
Tightening regulations and penalties
Bloomberg reports that China’s rare earths sector is already subject to strict regulation, with extraction and export quotas imposed on companies.
The latest plan includes full traceability of rare earths throughout the supply chain, with the company’s responsibilities clearly defined. It is also stepping up efforts to crack down on illegal mining and trade, an ongoing issue despite previous crackdowns.
Violators will now face fines of up to 10 times the financial gains from the illegal activity, double the amount in the previous draft, the agency said. The scope of officials responsible for the charges has also been expanded.
The government said that “there are still some prominent problems in the management of rare earth elements in China,” noting that “the punishment for illegal mining and illegal purchase and sale of rare earth products is not enough.”
Historical context
China has established a dominant position in rare earth mining and refining over the past three decades. This set of 17 elements is critical for high-tech manufacturing and the green energy transition.
Former Chinese President Deng Xiaoping highlighted China’s strategic advantage in 1992, saying, “The Middle East has oil, and China has rare earths.”
