Significant progress in mergers and acquisitions of rare earth industry in China

Baotou Steel Rare Earth Group and Xiamen Tungsten Industry Co., Ltd. announced on August 5 that the implementation plan for the establishment of large-scale rare earth group as the main body has been approved by the relevant Chinese authorities. A few leading enterprises in China have taken the lead in advancing the merger and reorganization of rare earth industries and made major breakthroughs.

Baotou Steel Rare Earth Group is the world's largest rare earth production and processing enterprise. In 2014, it obtained 2,568 tons of rare earth export quota, ranking first among Chinese rare earth enterprises. Xiamen Tungsten Company is also an important rare metal production and processing enterprise in China.

According to the reply from the Ministry of Industry and Information Technology of China, Baotou Iron & Steel Group, the controlling shareholder of Baotou Rare Earth Group, will integrate all the rare earth mining in Inner Mongolia through market-oriented operation methods such as holding, shareholding and equity swap according to its proposed implementation plan. The smelting separation and comprehensive utilization enterprise and the Gansu Rare Earth Group, and the Baotou Steel Rare Earth Group as the main body, established the “North China Rare Earth (Group) High-Tech Co., Ltd.”.

Xiamen Tungsten Company will integrate the rare earth mining, smelting, separation and comprehensive utilization enterprises outside Fujian Minmetals Group in Fujian Province to form a large group.

The related integration formation work was required to be completed before the end of 2014.

“The integration of rare earth industry is welcoming a new situation.” The relevant person in charge of Baotou Steel Group said that the establishment of large-scale rare earth group can significantly increase the concentration of the industry, help regulate the development and production and export behavior of Chinese rare earth enterprises, and avoid vicious market competition. Enhance the international competitiveness and voice of China's rare earth industry.

The “mother of new materials” rare earth is widely used in cutting-edge technology. China is the world's largest supplier and supplier of rare earth resources, supplying more than 90% of the world's rare earth products for a long time. However, the problems of China's rare earth industry are scattered, chaotic and poor.

“Industry concentration is too low.” Yuan Kaihong, director of the Raw Materials Industry Research Institute of the CCID Research Institute of the Ministry of Industry and Information Technology, said, “There are nearly 100 rare earth smelting and separating enterprises in the country, with an average annual production capacity of less than 4,000 tons per household.”

In addition, the industrial structure is also extremely fragmented. For example, the annual output of China's NdFeB rare earth permanent magnet materials has reached 80,000 tons, accounting for nearly 80% of global production, but there are nearly 200 manufacturers in Inner Mongolia and Jiangxi. There are only 5 enterprises with an annual production capacity of more than 3,000 tons in more than 10 provinces such as Shanxi and Zhejiang.

The low concentration of industry and scattered layout have become an important incentive for vicious competition. According to industry insiders, over the years, China has supplied more than 90% of the world's rare earth resources, but it has no international pricing power for rare earths. A major reason is that China's rare earth industry has a loosely distributed layout and companies are pressing each other.

“Foreign manufacturers often take an order to inquire about a number of Chinese companies, enticing companies to suppress each other. This long-term external trading method has seriously weakened our resource advantages and capacity advantages.” Yang Zhanfeng, Dean of Baotou Rare Earth Research Institute Say.

In recent years, the disorderly expansion of the rare earth industry has made the problems of non-standard operation and vicious competition worse.

"Because of the optimistic about the rare earth market, many regions have built and expanded rare earth production capacity, resulting in the national rare earth smelting separation and the serious excess capacity of rare earth new materials. The comprehensive operating rate of the separation and smelting enterprises is less than 30%." Secretary General of China Rare Earth Industry Association Ma Rongzhen and other industry insiders pointed out that

Promoting the merger and reorganization of rare earth enterprises with the power of the market and establishing a large rare earth group is a major measure that China has introduced in recent years to solve the above problems and promote the healthy development of the rare earth industry.

At the beginning of this year, a person in charge of the Ministry of Industry and Information Technology of China said that in recent years, through the market to survive the fittest, the country has basically formed the Baotou Steel Group, China Minmetals, Chinalco, Guangdong Rare Earth, Luzhou Rare Earth and Xiamen Tungsten Industry. The development pattern of the rare earth industry led by the home enterprise. China will focus on supporting these six companies to lead the formation of large-scale rare earth enterprise groups.

The six companies included in the Rare Earth Group will undertake the task of integrating rare earth enterprises and optimizing resources in the region, including integrating scattered and scattered smelting and separating enterprises in the region. At the same time of integration, capacity reduction and environmental governance should be carried out in accordance with industrial policy requirements. The government will further optimize and improve industrial policies and create a market environment conducive to the development of enterprises.

Like many major reforms, the process of China's rare earth industry integration will not be smooth. The reporter learned that many companies deliberately delay or resist integration, so that some of the rare earth producing areas also have a wait-and-see or local protectionist mentality.

"These problems are the biggest obstacles to the healthy development of the rare earth industry. However, from the perspective of the establishment of two large-scale rare earth enterprise groups, China's determination to regulate the development of the rare earth industry is very firm. With the improvement of relevant policies, integration is the trend of the times." Inner Mongolia Yu Guangjun, director of the Institute of Economics of the Academy of Social Sciences, said.

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