Breaking through the bottleneck, the rare earth industry is going to group

**Abstract** After a period of chaotic and unregulated mining, the rare earth industry, which has long suffered from overcapacity, is now on the verge of entering a new era of consolidation. Recently, the Ministry of Industry and Information Technology, in collaboration with other relevant departments, held a special meeting in Beijing to discuss the formation of large-scale rare earth enterprise groups. The goal is to further strengthen the restructuring and regulation of the industry. The meeting highlighted that China has already established a development model led by six major companies: Baotou Steel Group, China Minmetals, Chinalco Corporation, Guangdong Rare Earth, Luzhou Rare Earth, and Xiamen Tungsten Industry. Moving forward, these companies are expected to lead the way in mergers and acquisitions, forming larger, more efficient rare earth enterprises. This shift signals a move away from the previous state of disorderly competition toward a more structured and regulated industry. “Through this meeting, it’s clear that the government is committed to integrating the rare earth sector,” said analyst Bian Binbin. “Forming large-scale groups is not only a trend but also a necessary step for reshaping the industry. Policies will likely favor these consolidated entities, while smaller, less integrated players may be phased out.” **Sorting Out the Industry After Development** As a strategic resource, rare earth elements are often referred to as the “MSG of industry” due to their unique properties that enable the creation of advanced materials used in military, metallurgy, petrochemicals, glass ceramics, and new material technologies. However, the high value of rare earths has led to rampant, uncontrolled mining, causing serious environmental damage and resource wastage. An industry insider revealed that in areas like Cangzhou, where rare earth resources are abundant, many locals have engaged in illegal mining using low-cost equipment. This has not only damaged the environment but also resulted in massive resource loss. To curb such activities, China introduced a special invoice system for rare earths. However, according to analysts, this system has proven ineffective in curbing illegal operations. “Many black mines have adapted by setting up trading companies to obtain VAT invoices, then ‘cleaning’ their illegally mined products before selling them to large enterprises with export quotas,” explained Bian Binbin. “Once the transaction is complete, the companies are shut down to avoid detection.” Similarly, another analyst pointed out that the current policy framework lacks strict enforcement, allowing unqualified firms to exploit loopholes. Despite efforts such as the “Rare Earth Access Conditions” and anti-black-market campaigns, the industry still faces deep-rooted issues. In response, the government aims to promote standardized development through the formation of large, centralized rare earth enterprises—entities that are easier to regulate and manage. **Coping Strategies in the International Change** Beyond domestic challenges, the shifting global landscape is also driving the need for industry restructuring. Countries like the U.S. and Australia, which also possess rich rare earth reserves, have imposed strict environmental regulations, making local mining expensive and less attractive. As a result, many foreign companies prefer to source rare earths from abroad. China’s export quota system has drawn criticism from international bodies, including the WTO, which recently ruled that some of its policies violate trade rules. This could lead to changes in 2015, such as replacing export quotas with licenses and removing tariffs. Analysts worry that this shift could return the industry to a state of price competition and market instability. To prevent this, forming large, organized rare earth groups is seen as an essential strategy. “Grouping helps consolidate power, streamline operations, and ensure better control over the industry,” said Bian Binbin. “It also allows the government to implement targeted support policies, while weaker players may be forced out.” In addition, experts believe that China will introduce new measures to mitigate the impact of the WTO ruling. These may include higher resource taxes or stricter environmental requirements for mining. A “Rare Earth Industry Cleaner Production Plan” has already been announced, signaling a push toward sustainable development. **Helping the Industry Move Toward High-End** For years, China’s rare earth industry has remained at a low-value stage, exporting raw materials at low prices while importing finished products at high costs. This has led to significant waste and inefficiency. By forming large-scale groups, the industry can shift toward high-end applications and innovation. “Smaller companies lack the resources for R&D,” said Bian Binbin. “Grouping allows for greater investment in technology, improving domestic competitiveness and reducing reliance on foreign patents.” Baotou Steel Rare Earth Group and Hebei Xinao Group have already taken steps to develop downstream industries, creating a more integrated supply chain. According to Lian Jianyu, CEO of a medical systems company, building a full industrial chain—from mining to high-value products—is essential for long-term growth. The government has recognized this need. The recent meeting emphasized that large rare earth groups should play a key role in implementing national policies, maintaining market order, and driving high-end applications. With stronger coordination and clearer direction, China’s rare earth industry is poised for a more sustainable and competitive future.

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