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China has approved a merger of key rare-earths companies, creating a behemoth set to strengthen its control over the global sector it has dominated for decades.

The company logo of Minmetals Resources seen in Hong Kong in 2011. | REUTERS
The company logo of Minmetals Resources seen in Hong Kong in 2011. | REUTERS

The entity will be formed through merging rare-earth units of government-owned companies including China Minmetals Corp., Aluminum Corp. of China and Ganzhou Rare Earth Group Co., according to a stock exchange filing from China Minmetals Rare Earth Co. The new group will accelerate the development of mines in the south, CCTV reported.

Bloomberg News reported in September that China was planning to create two giants — one in the country’s north and the other in the south, with each focusing on a different subset of rare earth materials. China controls most of the world’s mined output of rare earths, a broad group of 17 elements that are used in everything from smartphones to fighter jets, and has a stranglehold over processing.

But its dominance has been an increasing concern. The little-known materials were thrust into the spotlight in 2019 when China considered export controls as part of its trade war with the U.S. — which relies on the country for 80% of its imports.

While ultimately no restrictions were ever implemented, it highlighted the risks of being dependent on one country, and spurred a raft of announcements from Western economies pledging to boost their rare-earths independence.

The latest round of consolidation follows restructuring efforts by Beijing that created six licensed groups in 2016. The government also controls production, granting annual quotas to the firms. This year’s volume has been set at 168,000 tons.

Rare earth prices have surged this year as demand outpaced supply, while a power shortage exacerbated disruptions and a broad rally in commodity prices increased production costs. Prices for neodymium and praseodymium — two elements used in permanent magnets — have surged to their highest levels in a decade.

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