#China #RareEarths #MiningIndustry #EconomicTrends #StateControl #PriceDecline #NationalSecurity #TechMaterials
Rare earth minerals, crucial for manufacturing a plethora of technology products from smartphones to electric vehicles, are predominantly sourced from China, the country with the world’s largest reserves of these essential elements. However, recent reports, including one from Nikkei Asia, highlight a significant downturn in the fortunes of China’s state-controlled rare earth companies. These enterprises, such as Rising Nonferrous Metals, are experiencing financial difficulties due to plummeting prices of key rare earth products like dysprosium, terbium, and didymium. This shift represents a stark departure from the profitability these companies enjoyed just a year prior.
The downturn is occurring amidst tightened government control over the sector, with the central government reinforcing its grip to ensure national resource security and industrial safety in a move reflecting President Xi Jinping’s broader national security strategy. The establishment of the China Rare Earth Group in December 2021—formed by merging three state-owned miners into a central company directly controlled by the State Council—exemplifies this strategy. While the government’s consolidation and oversight efforts aim to safeguard critical resources, the companies under its umbrella are struggling with the financial impacts of decreasing rare earth prices.
Furthermore, these price declines are occurring in a context of broader economic and strategic challenges, including escalating tensions with the United States. China’s assertion of control over its rare earth resources is seen as a part of its response to these international pressures. Despite these companies expanding their operations globally, as demonstrated by Shenghe Resources’ acquisition of Strandline Resources UK to gain control over Tanzanian mineral projects, the sector is yet to see a rebound in rare earth prices. The overall sales increases have not offset the significant losses incurred due to the price drops. Additionally, China Northern Rare Earth (Group) High-Tech, the largest rare-earth miner by volume, reported a nearly complete wipeout in profit during the first half of the year, underscoring the broader industry-wide challenges arising from increased supply, including heightened production, imports, and recycling, that have not been matched by demand growth.
This situation presents a complex scenario for China’s rare earth industry, balancing between maintaining global dominance in critical raw material supply, ensuring economic viability for its state-controlled enterprises, and navigating the geopolitics of resource security. How China maneuvers through these challenges could have significant implications for the global supply chain of tech materials and the international political landscape concerning raw material security and environmental sustainability.
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