Recently, the Raw Materials Division of China's Ministry of Industry and Information Technology published the initial list of companies that meet the criteria for accessing the rare earth industry on their official website, sparking significant attention in financial markets. This announcement reveals that a total of seven companies from Jiangxi, Shandong, Gansu, and Liaoning have made the cut for this first round of approvals. Notably, several major industrial players are notably absent from the list, including Baotou Steel Rare Earth, one of the leading names in the domestic rare earth sector. Only one subsidiary of Baotou Steel Rare Earth was included. Moreover, none of the rare earth enterprises from Sichuan province, which holds the nation’s second-largest rare earth reserves, appeared on the list.
So, why does this happen? What impact will the first batch of approved rare earth industry access lists have on the market? It is expected that leading enterprises will emerge gradually. Earlier this year, in August, the Ministry of Industry and Information Technology issued a notice regarding the approval process for rare earth enterprises. The notice stated that companies listed in the access announcements would receive priority support when it comes to mandatory production plans. The management department has set clear standards for production scale, process equipment, energy consumption, and resource utilization. For instance, the production scale of mixed rare earth mining enterprises should reach at least 20,000 tons/year (in terms of oxides), while independent smelting and separation enterprises should have a minimum annual output of 8,000 tons/year. Smelters producing rare earth metals should have an annual capacity of no less than 2,000 tons/year (in physical quantities).
Based on the first batch of approved enterprises, these seven companies include Dingnan Dahua New Material Resources Co., Ltd. in Jiangxi Province, Jixian Red Gold Rare Earth Co., Ltd., Zibo Baogang Ganoderma Lucidum from Shandong Province, Zibo Lingzhi Chemical Co., Ltd., Zibo Jiahua New Material Resources Co., Ltd., Gansu Rare Earth New Materials Co., Ltd., and Liaoning Jinzhou Kunhong New Material Industrial Co., Ltd. Interestingly, there is no single company from Sichuan province, despite its substantial rare earth reserves. Furthermore, aside from two companies in Jiangxi and Zibo Baogang Ganoderma lucidum, which are related to Minmetals Development and Baotou Steel Rare Earth respectively, there aren’t many leading companies in this list.
A reporter contacted relevant listed companies. “The list of companies that have entered the rare earth access conditions hasn’t had much of an impact on us,†said a staff member from the securities department of Baosteel Rare Earth. “It should be noted that being shortlisted simply means gaining access to the rare earth industry. Our subsidiary Zibo Baogang Ganoderma Lucidum has already been shortlisted, and the company headquarters has also applied for admission, which might appear in the next round of announcements.â€
For instance, *ST Tiancheng’s securities department staff mentioned that many investors have expressed concerns about Shenghe Rare Earth’s absence from the first batch of lists. Shenghe Rare Earth explained that domestic rare earth enterprises need to apply for industry access through the Ministry of Industry and Information Technology. Since the approval process this year is conducted in batches, Sichuan enterprises were not part of the first batch of applications, which is why Shenghe Rare Earth did not make the list. “Perhaps the company’s application is still under expert review. We are very confident that we will be included in the final list.â€
As of press time, Guangshao Nonferrous and Xiamen Tungsten Company had no response to calls.
Industry capacity needs to be integrated. An industry analyst agreed with the aforementioned company: “In the first half of this year, the relevant departments also announced the environmental protection list. The current list of rare earth industry enterprises is just the first batch. We anticipate that many more companies will be approved and announced in subsequent batches. For instance, Baotou Steel Rare Earth, Guangzhao Nonferrous Metals, and Shenghe and other rare earth enterprises have met the entry barriers. In the long term, the Ministry of Industry and Information Technology’s introduction of rare earth enterprise access conditions aims to regulate the industry and optimize its production capacity structure by restricting the capacity of smaller companies.â€
Ma Rongzhen, Secretary General of the China Rare Earth Industry Association, mentioned earlier this year that China’s rare earth enterprises have a domestic production capacity of approximately 320,000 tons (in rare earth oxides), far exceeding the global annual demand of around 120,000 tons. This overcapacity necessitates industry integration and increased industrial concentration.
Wang Jianhu, an analyst at Great Wall Securities, told the reporter: “The domestic rare earth industry currently suffers from severe overcapacity. These small rare earth enterprises fail to achieve economies of scale and also pose environmental challenges locally. Therefore, during the industry’s standardization process, smaller and disorganized enterprises are being phased out, reducing production capacity.â€
He also mentioned: “Looking ahead, although China’s rare earth reserves rank first globally, some countries are now strategically addressing their rare earth needs. For example, rare earth projects in the U.S., Australia, and elsewhere have made progress. The development of foreign rare earth industries will inevitably impact our own industries. For light rare earth products, the technical barriers are relatively low, making them more vulnerable. However, in terms of heavy rare earths, we still hold an advantage, with resources primarily located in Jiangxi, Fujian, and Guangdong provinces.â€
Unnamed analysts believe that the rise of foreign rare earth industries will ultimately affect China’s ability to influence the global rare earth market. Meanwhile, the development of the domestic rare earth industry remains influenced by both fundamental factors and policies. “The domestic rare earth industry access policies aim primarily to limit production capacity and optimize the structure. Fundamentals and demand remain the key factors driving industry development. At present, the situation isn’t ideal. Therefore, policy support and direction for the industry will become increasingly crucial,†said an anonymous analyst.
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