{"id":776,"date":"2024-11-04T18:01:36","date_gmt":"2024-11-05T01:01:36","guid":{"rendered":"https:\/\/vpzajoti4c.onrocket.site\/news\/china-rare-earth-group-co-ltd\/"},"modified":"2025-05-11T09:36:02","modified_gmt":"2025-05-11T15:36:02","slug":"china-rare-earth-group-co-ltd","status":"publish","type":"news-archive","link":"https:\/\/rareearthexchanges.com\/news\/china-rare-earth-group-co-ltd\/","title":{"rendered":"When China Merged Three Rare Earths State-Owned Entities: Quest for Market Power and Efficiency"},"content":{"rendered":"<p><strong>Highlights<\/strong><\/p>\n<ul>\n<li>China merged three state entities to form China Rare Earth Group Co. Ltd in 2021, controlling 62% of national heavy rare earth supplies.<\/li>\n<li>The consolidation aimed to increase market power, efficiency, and address challenges in China\u2019s rare earth industry.<\/li>\n<li>The merger significantly impacted global rare earth pricing and supply chains, causing concern in Western countries.<\/li>\n<\/ul>\n<hr>\n<p><em>Back in Early 2022 China moved to consolidate the national rare earths industry, a core part of a bid to bolster market power, boost efficiency, plus reinforce strategic, economic, and sustainability goals. Three state entities were merged then, the genesis of\u00a0<a href=\"https:\/\/www.regcc.cn\/zgxtjten\/index.shtml\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"external-link\">Rare Earth Group Co. Ltd<span class=\"sr-only\"> (opens in a new tab)<\/span><\/a>, at the time the biggest play in this unfolding market.<\/em><\/p>\n<p>Before delving into the mega deal, a brief overview into the <a class=\"wpil_keyword_link\" href=\"https:\/\/rareearthexchanges.com\/?post_type=acf-post-type&amp;p=38\" title=\"News\" data-wpil-keyword-link=\"linked\" data-wpil-monitor-id=\"56139\">rare earth<\/a> industry<\/p>\n<p>What are rare earths? 17 chemical elements, including lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, <a class=\"wpil_keyword_link\" href=\"https:\/\/rareearthexchanges.com\/learn\/rare-earths\/holmium\/\" title=\"Holmium\" data-wpil-keyword-link=\"linked\" data-wpil-monitor-id=\"103532\">holmium<\/a>, erbium, thulium, ytterbium, lutetium, scandium, and yttrium.<\/p>\n<p>Why are these commodities essential?\u00a0<\/p>\n<p>Rare earths are essential inputs for myriad products, from high-tech consumer products (computers, phones, new energy vehicles, etc.) and military equipment (lasers, guidance systems, radar systems, etc.), among others.<\/p>\n<p>Rare earth minerals are used in permanent magnets \u2013 the biggest and most important use \u2013 without which the spindle motors and voice coils of phones and laptops would be disabled.<\/p>\n<h2>A Megafirm with Large Market Share<\/h2>\n<p>Considered by trade press at the time as a \u201cmegafirm\u201d the move meant that the national-backed system would control about 62% of the Asian nation\u2019s national heavy rare earths supplies.<\/p>\n<p>Classified as a state-owned entity or \u201cSOE\u201d, the venture thereafter would wield significant control over pricing of rare earth elements, with ripple effects across REE supply chains.<\/p>\n<h2>What\u2019s the background? When was this meta SOE formed? What was the ownership?<\/h2>\n<p><a class=\"wpil_keyword_link\" href=\"https:\/\/rareearthexchanges.com\/news\/europes-first-magnet-plant-breakthrough-or-overhype\/\" title=\"Europe\u2019s First Magnet Plant: Breakthrough or Overhype?\" data-wpil-keyword-link=\"linked\" data-wpil-monitor-id=\"103272\">China Rare Earth<\/a> Group Co. Ltd, a state-owned enterprise (SOE) \u00a0was formed on December 23, 2021, in East China\u2019s Ganzhou, Jiangxi Province. \u00a0The SOE is directly supervised by China\u2019s state assets regulator.<\/p>\n<h2>Is the mega consolidator of REE the result of a three way merger?<\/h2>\n<p>Yes. \u00a0\u00a0The mega-company was formed by the coming together of three companies:<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Aluminum Corporation of China<\/p>\n<p>\u00b7., Ltd<\/p>\n<p>Plus, two research firms \u2014 China Iron &amp; Steel Research Institute Group and Grinm Group Corporation Ltd.<\/p>\n<h2>Did this become one of the biggest REE conglomerates?<\/h2>\n<p>Yes.\u00a0 The SOE emerged as a conglomerate of some top industrial players, including the rare earth groups of thee of what were known as the \u201cBig Six\u201d SOEs dominating REE at the time\u2014see the list above.<\/p>\n<h2>Financial\/Cap table reported at the time<\/h2>\n<table>\n<thead>\n<tr>\n<th><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><\/td>\n<\/tr>\n<tr>\n<td><strong>China Rare Earth Group Co. Ltd*<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p> |<\/p>\n<p>| \u2014 |<\/p>\n<p>| <\/p>\n<p>Members<\/p>\n<p> | <\/p>\n<p>Subscribed capital<\/p>\n<p> | <\/p>\n<p>Shares ratio<\/p>\n<p> |<\/p>\n<p>| <\/p>\n<p>The State-owned Assets Supervision and Administration Commission (the national asset regulator)<\/p>\n<p> | <\/p>\n<p>RMB 31.21 million<\/p>\n<p> | <\/p>\n<p>31.21%<\/p>\n<p> |<\/p>\n<p>| <\/p>\n<p>Aluminum Corporation of China (CHALCO)<\/p>\n<p> | <\/p>\n<p>RMB 20.33 million<\/p>\n<p> | <\/p>\n<p>20.33%<\/p>\n<p> |<\/p>\n<p>| <\/p>\n<p>China <a class=\"wpil_keyword_link\" href=\"https:\/\/rareearthexchanges.com\/news\/china-minmetals-turns-momentum-into-signal-quality-wins-deepened-partnerships-and-a-strategic-push-into-critical-metals\/\" title=\"China Minmetals Turns Momentum Into Signal: Quality Wins, Deepened Partnerships, and a Strategic Push Into Critical Metals\" data-wpil-keyword-link=\"linked\" data-wpil-monitor-id=\"103273\">Minmetals<\/a> Corporation<\/p>\n<p> | <\/p>\n<p>RMB 20.33 million<\/p>\n<p> | <\/p>\n<p>20.33%<\/p>\n<p> |<\/p>\n<p>| <\/p>\n<p>Ganzhou Rare Earth Group Co., Ltd<\/p>\n<p> | <\/p>\n<p>RMB 20.33 million<\/p>\n<p> | <\/p>\n<p>20.33%<\/p>\n<p> |<\/p>\n<p>| <\/p>\n<p>China Iron &amp; Steel Research Institute Group<\/p>\n<p> | <\/p>\n<p>RMB 3.9 million<\/p>\n<p> | <\/p>\n<p>3.9%<\/p>\n<p> |<\/p>\n<p>| <\/p>\n<p>Grin Group Corporation Ltd.<\/p>\n<p> | <\/p>\n<p>RMB 3.9 million<\/p>\n<p> | <\/p>\n<p>3.9%<\/p>\n<p> |<\/p>\n<p>*****conducted at time of merger via\u00a0<em>Dezan Shira &amp; Associates<\/em><\/p>\n<h2>Why did China consolidate its rare earth assets?<\/h2>\n<p>China has been the world\u2019s rare earth industry leader since the 2000s. Based on various estimates, China is responsible for 55 percent to 70 percent of rare earth mining and up to 90 percent of processing.<\/p>\n<p>What is some challenges China\u2019s REE face?<\/p>\n<h2>What\u00a0<a href=\"https:\/\/www.globaltimes.cn\/page\/202109\/1235016.shtml?mc_cid=a5\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"external-link\">challenges<span class=\"sr-only\"> (opens in a new tab)<\/span><\/a>\u00a0does China\u2019s rare earth industry face?<\/h2>\n<p>A Seemingly contradictory situation emerged even a couple years ago given China\u2019s market dominance continued to weaken even then.\u00a0 According to the U.S. Geological Survey (USGS) Chinese share of global output declined 86 percent in 2014 to 58.3 percent in 2020. With ongoing \u00a0restructuring even by early 2022, the nation\u2019s rare earth industry was represented with a highly fragmented, piecemeal ecosystem, marked by haphazard pricing, low-end competition leading to crisis in the industry, along with inefficient use of resources not to mention serious ecological problems.\u00a0 On this latter point China now invests far more heavily in environmental protection which becomes more of a factor on flow of product than quotas.<\/p>\n<p>\u00a0<strong>So, wasthe mega-merger China\u2019s bid to change this challenging market condition?<\/strong><\/p>\n<p>Yes,\u00a0 China wants to change this situation, ramp up its rare earths industry performance amid growing global competition, and safeguard the asset value of rare earth minerals as a \u2018rare\u2019 resource.<\/p>\n<p>The previous consolidation of the country\u2019s rare earth industry into six big SOEs failed to achieve these goals. This has led the government to cultivate a new industry leader to develop strategic advantages instead of focusing on short-term economic interests.<\/p>\n<p>Moreover, China requires more rare earths due to its industrial upgrading and to achieve its carbon goals. A highly consolidated rare earth industry will provide more guarantees on these fronts.<\/p>\n<h2>Why does this merger matter?<\/h2>\n<p>Then with this mega-merger involving three state entities becoming the China Rare Earth Group Co. Ltd, overnight China\u2019s REE producer market morphed into something different.<\/p>\n<p>Going back to 2021 data this group would possess \u00a052,719 metric tons of mining quota (31 percent of China\u2019s national total) and 47,129 metric tons of smelting quota (29 percent of the national total).<\/p>\n<p>The firm would account for about 62 percent of heavy rare earth supplies nationally.<\/p>\n<p>**And its pricing power would increase, no?  <\/p>\n<p>**<\/p>\n<p>Yes. This megafirm\u2019s bolstered\u00a0 REE pricing power triggered changes to the whole supply chain.<\/p>\n<h2>How did pricing change already by the end of 2021 into early 2022?<\/h2>\n<p>The mean average export price of rare earths surged 36% percent from a year ago in November to US$13,200. Prices for dysprosium and terbium grew by 50 percent in 2021, representing highs.<\/p>\n<h2>Did this mega-consolidation spook the West, including the USA?<\/h2>\n<p>Yes.\u00a0 The analysts at\u00a0<a href=\"https:\/\/www.china-briefing.com\/\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"external-link\">China Briefing<span class=\"sr-only\"> (opens in a new tab)<\/span><\/a>\u00a0produced by\u00a0<em><a href=\"https:\/\/www.dezshira.com\/?ENTRY=%252Fnews%252Fchina-merges-three-rare-earths-state-owned-entities-to-increase-pricing-power-and-efficiency%252F\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"external-link\"><strong>Dezan Shira &amp; Associates<\/strong><span class=\"sr-only\"> (opens in a new tab)<\/span><\/a>\u00a0reported that the deal would bolster and encourage technology sharing between firms, leading to more efficient allocation and use, plus increase China\u2019s overall utilization rate of medium and heavy REEs.<\/em><\/p>\n<span class=\"et_bloom_bottom_trigger\"><\/span>","protected":false},"excerpt":{"rendered":"<p>China consolidated its rare earth industry by forming China Rare Earth Group Co. Ltd, a state-owned megafirm controlling 62% of heavy rare earth supplies and boosting pricing power.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"news-type":[125,126,123,124,122],"organization":[],"regions":[315],"class_list":["post-776","news-archive","type-news-archive","status-publish","format-standard","hentry","news-type-aerospace-defense","news-type-automotive-industry","news-type-clean-energy-technology","news-type-electronics","news-type-ree-news","regions-china"],"acf":[],"_links":{"self":[{"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/news-archive\/776","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/news-archive"}],"about":[{"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/types\/news-archive"}],"author":[{"embeddable":true,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/comments?post=776"}],"version-history":[{"count":25,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/news-archive\/776\/revisions"}],"predecessor-version":[{"id":81530,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/news-archive\/776\/revisions\/81530"}],"wp:attachment":[{"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/media?parent=776"}],"wp:term":[{"taxonomy":"news-type","embeddable":true,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/news-type?post=776"},{"taxonomy":"organization","embeddable":true,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/organization?post=776"},{"taxonomy":"regions","embeddable":true,"href":"https:\/\/rareearthexchanges.com\/wp-json\/wp\/v2\/regions?post=776"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}