Corporate consolidation in industry called 'positive trend'

The government has given the green signal for two major rare earth producers to become conglomerates by the end of this year to further consolidate resources, combat smuggling and alleviate overcapacity.

Xiamen Tungsten Co Ltd and Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co have been approved by the Ministry of Industry and Information Technology to form the two rare earth groups.

Xiamen Tungsten will integrate rare earth mining, separating and manufacturing within Fujian province in the south, excluding what is owned by China Minmetals Corp by the end of 2014.

Baotou Steel will set up China North Rare Earth High Tech Co Ltd, consolidating rare earth mining, separating and processing within the Inner Mongolia autonomous region and Gansu Rare Earth Group Co Ltd in the north.

These two companies are among six groups encouraged to consolidate earlier this year. The other four groups are: China Minmetals Corp, Aluminum Corp of China, Ganzhou Rare Earth Group Co Ltd and China National Nonferrous Metals Industry Guangzhou Corp.

The founding of big groups is only the first step toward consolidation of the rare earth industry in China. Various companies face challenges in breaking regional protectionism and speeding up clearance of illegal practices and mining operations.

Rare earths are a group of minerals that have many uses in high-technology sectors such as defense and renewable energy. China supplies 90 percent of the global demand.

Du Shuaibing, an analyst at natural resources consultancy Baichuan Information, says "the move toward conglomerates signals a positive trend in the industry, as smaller enterprises have welcomed consolidation into major players to have more access to export quotas or production permits".

The result of China's appeal to the World Trade Organization over its March ruling that China had acted inconsistently with regard to export measures imposed on rare earths is expected to be announced this month.

Industry experts consider it likely that China will lose its appeal but also expect China to raise its export quota and lower tariffs by 2015.

The Baotou China Rare Earth Industry Forum is expected to run from Aug 7 through Aug 9, in Baotou, the Inner Mongolia autonomous region.

wangzuoqiang@chinadaily.com.cn