SHANGHAI, Dec 10 (SMM) - It is reported that the China Rare Earth Group, jointly established by China Minmetals, Aluminum Corporation of China, and Ganzhou Rare Earth Group, will be listed at the end of this month the latest. It will be a significant milestone underpinning the accelerated horizontal integration process among rare earth companies in south China.
In 2021, China's total rare earth mining quota is 168,000 mt, of which China Minmetals, Aluminum Corporation of China, and China Southern Rare Earth collectively accounted for 36%. The smelting and separation quota is 162,000 mt, and the three together accounted for 36%. The mining quota for ionic rare earth ore is 19,000 mt, of which the three together account for 68%. The newly established Group will account for two-thirds of the upstream industry of medium and heavy rare earth.
Compared with the horizontal integration of mergers and reorganisations between enterprises in the south, the vertical integration between the upstream and downstream of the rare earth industry chain in the north appears to be a little slower. It is reported that Northern Rare Earth has acquired some metal companies and plans to increase the metal production lines such as praseodymium and neodymium, so as to realise the vertical extension from the upstream such as mining and separation to the midstream like metal smelting.
The integration of the rare earth industry in north and south China has resulted in higher industrial concentration as well as concentrated market pricing power. It will facilitate the stability of mainstream rare earth products prices. And the industry will then develop at a level which is more welcomed by both the upstream and downstream, and avoid the rapid changes in the market. The reason is that if the prices are rising too fast, the downstream will turn away from such offers. Meanwhile, it will be more difficult for upstream and downstream companies to negotiate prices, and upstream companies can only bear the losses caused by the rapid changes in raw material prices. Secondly, the use of mainstream rare earth products by enterprises has decreased, while the use of low-cost alternatives has increased. For example, the prices of terbium oxide has increased rapidly since November 2020, and the amount of terbium metal used by some magnetic materials companies has been reduced from 8 kg per ton of rough NdFeB to 2 kg. Thirdly, overseas competitiveness has weakened. The prices of mainstream products have risen rapidly from 2020 to 2021, and overseas orders of some upstream companies have decreased as well.
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