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

Baotou Steel Rare Earth Group, recognized as the world’s largest producer and processor of rare earth elements, secured 2,568 tons of rare earth export quota in 2014—the highest among Chinese companies. Meanwhile, Xiamen Tungsten Company is a key player in the production and processing of rare metals in China. According to a response from the Ministry of Industry and Information Technology, Baotou Iron & Steel Group, the parent company of Baotou Rare Earth Group, plans to integrate all rare earth mining operations in Inner Mongolia using market-oriented methods such as equity holding, shareholding, and swaps. The plan also includes merging with smelting, separation, and comprehensive utilization enterprises, as well as the Gansu Rare Earth Group, to form "North China Rare Earth (Group) High-Tech Co., Ltd." Xiamen Tungsten Company aims to consolidate rare earth mining, processing, and utilization businesses outside Fujian Province under the Minmetals Group, forming a larger, more efficient enterprise. These integration efforts were expected to be completed by the end of 2014. According to an official from Baotou Steel Group, the formation of large-scale rare earth groups will help increase industry concentration, regulate production and export activities, and prevent unhealthy competition. It is expected to boost China’s international influence and competitiveness in the rare earth sector. Rare earth elements, often called the "mother of new materials," are essential in advanced technologies. China has long been the world's leading supplier, providing over 90% of global rare earth products. However, the industry has faced challenges such as fragmentation, inefficiency, and low concentration. Experts point out that there are nearly 100 rare earth smelting and separation companies in China, with an average annual production capacity of less than 4,000 tons per company. In the NdFeB permanent magnet industry alone, which accounts for nearly 80% of global production, there are over 200 manufacturers, but only about five have annual capacities exceeding 3,000 tons. The lack of concentration and scattered layout have led to intense competition and weak pricing power. Foreign buyers often exploit this by soliciting multiple Chinese suppliers, driving down prices and undermining China’s resource advantage. Industry leaders emphasize that disorderly expansion has worsened operational inefficiencies and cutthroat competition. Many regions have expanded production capacity without proper planning, leading to overcapacity in smelting and new material sectors. The operating rate of these facilities is below 30%. To address these issues, the Chinese government has promoted mergers and reorganizations, aiming to build large, efficient rare earth groups. Six major companies—Baotou Steel, China Minmetals, Chinalco, Guangdong Rare Earth, Luzhou Rare Earth, and Xiamen Tungsten—are leading this effort. These companies are tasked with integrating regional rare earth enterprises, optimizing resources, and reducing excess capacity while adhering to environmental regulations. The government is also working to improve industrial policies and create a better business environment. Despite the progress, the integration process faces resistance from some companies and local governments that are hesitant or protective of their interests. However, experts believe that the government remains committed to reform, and with continued policy support, integration is the future of the industry.

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