China has officially approved plans to consolidate the country's rare-earth businesses into six large companies in the sector, the Ministry of Land and Resources (MLR) said on Thursday, as authorities work on reforming and upgrading traditional industries.
This approval is in the light of the State Council's requirement to fast-track the strategy of developing large-scale rare-earth groups in an attempt to further optimize and adjust the structure of the domestic rare-earth industry, said the statement.
The six companies are Beijing-based China Minmetals Corp, Baotou Iron & Steel (Group) Co in North China's Inner Mongolia Autonomous Region, Aluminum Corporation of China (Chalco) in Beijing, Xiamen Tungsten Co in East China's Fujian Province, Ganzhou Rare Earth Group Co in East China's Jiangxi Province, and Guangdong Rare Earth Industry Group in South China's Guangdong Province, according to an announcement issued by the ministry on Thursday.
Following the announcement, the share prices of Baotou Iron & Steel's listed arm China Northern Rare Earth (Group) High-Tech Co and Xiamen Tungsten rose by the 10 percent daily limit on the Shanghai Stock Exchange, closing at 24.6 yuan ($3.97) and 33.65 yuan respectively. Shenzhen-listed Minmetals closed at 38.16 yuan on Thursday, also up by the 10 percent limit, while Shanghai-listed Chalco rose 9.95 percent to 9.5 yuan.
The rare-earth strategy was promoted by the Ministry of Industry and Information Technology, which required the six companies to merge rare-earth businesses involved in fields ranging from mining to smelting separation and utilization.
For instance, in the filing posted to the Shanghai bourse in August 2014, China Northern Rare Earth said the company was asked to consolidate rare-earth companies in Inner Mongolia.
"The consolidation can eliminate disorderly competition and exploitation in China's rare-earth industry," Lin Boqiang, a professor of Xiamen University, told the Global Times on Thursday.
The central government also intends to improve its control over rare earths via integration, Du Shuaibing, an analyst with natural resources market consultancy Baichuan Information, told the Global Times Thursday.
For the 2015, the MLR on Thursday set the total production quota of rare earths at 105,000 tons, unchanged from 2014.
China applied export quotas and raised export tariffs on rare earths in 2010 to protect natural resources, ending the export restrictions in 2015 and scrapping the tariffs from May 1, in line with a ruling from the WTO.
Despite the quotas and tariffs removal, rare-earth companies, especially smaller ones, will continue suffering a hard time this year amid economic slowdown, said analysts.
But things may improve next year, as the industrial consolidation, expected to be completed by the end of this year, will increase rare earth prices, Lin noted.
Rare earths are a group of highly valued minerals used in the manufacturing of high-tech products ranging from smartphones to airplane equipment.
