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—already suffering 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 rectification of the industry. The meeting highlighted that China has already established a basic industrial structure 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 take the lead in driving mergers and acquisitions, forming larger and more efficient rare earth enterprises. This shift signals a move away from the previous chaotic competition toward a more organized and controlled industry. According to Zhuo Bin, an analyst at Bian Binbin Research, "The state’s attitude towards rare earth integration is clear and decisive. Forming large-scale groups is not only a trend but also a necessary step for reshaping the domestic market. Policies will increasingly favor these consolidated entities." **Post-Development Industry Restructuring** As a strategic resource, rare earth elements are often referred to as the “industrial MSG” due to their unique physical properties. They are widely used in military, metallurgy, petrochemicals, glass ceramics, and advanced materials. However, this high value has led to rampant illegal mining, causing serious environmental damage and resource waste. An industry insider revealed that in regions like Cangzhou, where rare earth deposits are abundant, many locals engaged in private mining using low-cost equipment. This not only degraded the environment but also wasted valuable resources. To combat this, China introduced a special invoice system for rare earth transactions. However, experts like Bian Binbin argue that this system has not been effective in curbing illegal activities. Instead, black-market operations have adapted, often using trading companies to obtain tax invoices and then selling illegally mined rare earths to large enterprises. These operations are later dissolved to avoid detection. Similarly, some analysts point out that the policy flaws in the rare earth invoice system allow unqualified companies to exploit loopholes, leading to inefficiencies in regulation. Despite government efforts such as implementing access conditions and conducting crackdowns, the legacy of disorder remains significant. In response, the government aims to streamline the industry by promoting the formation of large, manageable rare earth groups. As Bian Binbin explained, "Grouping allows better oversight and policy implementation. It also opens the door for preferential support, while weaker players may be phased out." **Navigating International Challenges** In addition to internal challenges, the global geopolitical landscape is also influencing the direction of China's rare earth industry. Countries like the U.S. and Australia, which also hold rare earth resources, have imposed strict environmental regulations, making local mining costly. As a result, many foreign companies now source rare earths from abroad. China’s export quota system has drawn criticism, and recent WTO rulings suggest that these restrictions may soon end. If export quotas are replaced with licenses and tariffs removed, the industry could face renewed price competition from international players. To prevent this, forming large, integrated groups is seen as a necessary strategy. Experts warn that without proper control, foreign firms might dominate the market by sourcing cheap Chinese raw materials and selling high-value products abroad. To counter this, China is expected to introduce new policies, such as higher resource taxes or stricter environmental standards, to protect its resources and maintain a competitive edge. **Driving Industry Innovation** Historically, China’s rare earth industry has focused on low-value resource extraction, buying finished products at high prices, and wasting its natural assets. By forming large enterprise groups, the industry can shift toward high-end development and innovation. Bian Binbin noted that small companies lack the resources to invest in R&D, making them dependent on foreign patents. Consolidation would enhance research capabilities and help domestic firms compete globally. Baotou-based Lian Jianyu, General Manager of a medical systems company, emphasized the need to build a complete industrial chain—from mining to downstream applications. Companies like Rare Pobo, a joint venture between Baotou Steel Rare Earth Group and Hebei Xinao Group, are already moving in this direction. The recent meeting by the Ministry of Industry and Information Technology confirmed that large rare earth groups must play a key role in implementing national policies, maintaining market order, and developing high-end industries. As Bian Binbin concluded, "Forming these groups is not just about size—it’s about strengthening China’s position in the global rare earth market."

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