Jiangxi Ganzhou Rare Earth Group was established on March 30. Zhang Anwen, Deputy Secretary General of the Chinese Society of Rare Earths (CSRE), said the establishment of Jiangxi Ganzhou Rare Earth Group marks the formation of “4+1” framework on China’s rare earth industry restructuring.

The “4+1” framework involves Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech (hereinafter referred to as Baotou Steel Rare-Earth), Aluminum Corporation of China (Chalco), China Minmetals Corporation, Rising Nonferrous Metals Share and Ganzhou Rare Earth Group.

Jiangxi Ganzhou Rare Earth Group is the parent company of Ganzhou Rare Earth Mineral Industry and is now the only owner of rare earth mining rights in Ganzhou. Namely, it owns all of the 44 rare earth mining rights in Jiangxi. The group will merge rare earth smelting & separating enterprises and application enterprises in Ganzhou, enabling it to have access to 70-80% of rare earth mining and smelting capacity in Ganzhou. It plans to produce 40,000 to 60,000 mt of rare earth, compared with China’s rare earth mining indicator of 90,000 mt for 2012.     

Back in May 2011, the State Council issued the Opinions on Promoting Sustainable and Healthy Development of Rare Earth Industry. According to the opinions, rare earth industry shall be dominated by large firms, and the industry concentration of top three ion-type rare earth enterprises must exceed 80%.

                  

China Minmetals Corporation, Chalco, China Non-ferrous Metal Industry’s Foreign Engineering and Construction (NFC), Jiangxi Copper, Rising Nonferrous Metals Share, Xiamen Tungsten and Ganzhou Rare Earth Industry all tried to join in the merging and restructuring of rare earth industry.

According to Mr. Zhang, Chalco has merged rare earth enterprises in Jiangsu. Rising Nonferrous Metals Share has been in charge of M&As of rare earth companies in Guangdong. Ganzhou Rare Earth Group will be responsible for rare earth industry integration in Ganzhou. China Minmetals Corporation intends to join in restructuring of Guangdong’s rare earth industry following its acquisition of some rare earth enterprises in Jiangxi, Guangxi and Hunan. Baotou Steel Rare-Earth will be responsible for M&As in rare earth industry in north China.

Rare earth industry restructuring in south and north China is led by Ganzhou Rare Earth Group and Baotou Steel Rare-Earth, respectively.

Light rare earth in north China is concentrated in Baotou in Inner Mongolia, Liangshan in Sichuan, Weishanhu in Shandong, while heavy rare earth in south China is centered on Jiangxi’s Ganzhou. Baotou Rare Earth, is actively seeking alliance with enterprises in Sichuan and Shandong.

Baiyun Erbo Rare Earth Mine is China’s biggest rare earth mine, containing 87.7% of rare earth. As Baotou Steel Rare-Earth’s rare earth industry integration accelerates, it will have access to more rare earth.

Heavy ion-type rare earth in Jiangxi accounts for roughly 40% of China’s total ion-type rare earth reserves, most of which is located in Ganzhou. All rare earth mining rights in Ganzhou are exclusively owned by Ganzhou Rare Earth Group.

Rising Nonferrous Metals Share also owns large quantities of rare earth. In comparison, China Minmetals Corporation and Chalco have less rare earth.
 

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There might be a crack in China's domination of rare earth metals – a mud-filled crack, thanks to a discovery by Japanese scientists. Vast reserves of rare earth metals that can be mined cheaply have been found in deep-sea mud on the Pacific ocean seabed. These essential metals are needed for a wide range of technologies – from consumer electronics like smartphones and TVs to advanced weapons systems and hybrid and electric vehicles.

"We have found deposits that are just two to four (meters) from the seabed surface at higher concentrations than anybody ever thought existed, and it won't cost much at all to extract," said professor Yasuhiro Kato from Tokyo University, the leader of the team, to The Telegraph.

                  

Some of the rare earth metals are found in other parts of the world, but the heavier metals such as dysprosium, terbium, europium, and ytterbium are the most important. After driving rivals out of the business in the 1990s, China became the source of 97 percent of these heavy rare earth metals. In 2009, China decided to restrict exports, which caused protests and legal complaints from the US and the European Union. China's actions also motivated more companies to set up shop in China to access the rare earth metals.

The team of Japanese scientists first discovered the Pacific ocean reserves two years ago, with that supply possibly being 1,000 times the supply of land-based deposits. The team's latest discovery is in Japan's Exclusive Economic Zone in deep-sea mud. It's 5,700 meters below sea level around the island of Minami-Torishama. The researchers says that while the rare earth metals are down deep, they can easily be distracted with minimal disturbance off the seafloor using pressurized air.

Professor Kato thinks the exploration will take another two years before it can be scaled up for production. Over 50 percent of the discovered deposit is heavy rare earth metals and they doen't need the radioactive by-product thorium that makes the metals hard to mine in China.


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Hafnium, indium, neodymium, erbium, europium...These are a few of the rare earth metals that make up most of the electronic guts of the world’s high technology.

“Rare earth” refers to the scarcity of easily-mined ores of the elements. Last month, we discussed a breakthrough in large-scale electrolysis that could make refining these ores and oxides much easier; now, Japan’s announcement of the discovery of a huge deposit of rare earths could make the market that much more competitive.

For us, that means cheaper electronics. If Japan can produce its own rare earth metals, as opposed to depending on imports from China (where 97 percent of rare earth metals in the world are produced), then China will have to lower its own prices on metals to remain commercially competitive. Breaking China’s monopoly on rare-earth resources could have wide-ranging consequences for the entire electronics industry.

This is the second major deposit discovery made by Japan in the last two years. A team led by Yasuhiro Kato of the University of Tokyo found caches near Hawaii and Tahiti in 2011 that were so rich in rare earths that one square kilometer of seabed could produce as much as 20 percent of the world’s annual consumption. Now, they’ve discovered a second plot of rich mud at the bottom of the Pacific.

Undersea mining has its own set of environmental issues; it’s not entirely clear yet how the techniques used can disrupt deep-sea life. Kato and his team will be investigating the new cache in a two-year study before attempting to start the mining process.


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Ganzhou Rare Earth Group was founded recently, and that means the core industrial group in major domestic rare earth producing region came online, and it's also an important step of domestic large rare earth leading company construction.

As high-tech industries develop rapidly in recent years, global demand for rare earth and consumption have been growing fast. China’s rare earth reserves accounts for 30% of the total volume in the world, and the country supplies 90% rare earth to the world. But the rare earth industry in China has been dispersed, disordered and polluting.

China’s rare earth industry needs to inspect exploration orders and raise industry consolidation ratio to develop healthily. China has taken effective measures recent years to the rare earth industry. On May 10th, 2010, China released the Proposals Regarding Promoting Sustainable and Healthy Development of Rare Earth Industry, pointing out China should form a rare earth industry led by large groups, and the consolidation rate of the top 3 enterprises in rare earth industry in south China should reach 80%.

The Suggestions Regarding Accelerating M & A at Major Industries was released on January 22nd, 2013, ordering China should push resources consolidation, and reduce the number of rare earth miners, smelters and separators, raise industrial consolidation rate and form the rare earth industry led by large enterprises.

Baotou and Ganzhou are major rare earth producing regions in north and south China, with rare earth output value accounting for 2/3 of total domestic rare earth output value.

Ganzhou is a major rare earth producing region in south China, and has developed rare earth mining and processing for over four decades. Of the 6 existing rare earth mining permits, 44 are in Ganzhou.

The Ganzhou Rare Earth Group is a large enterprise engaging in mining, smelting, separating, deep-processing and utilization, trade and researching, and the only group owning rare earth mining permit in Ganzhou.

Domestic rare earth market is under merger and acquisition, covering Minmetals, and Inner Mongolia Baotou Steel Rare-Earth Hi-Tech, Ganzhou Rare Earth and Xiamen Tungsten.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech is now constructing China Northern Rare Earth Group jointly with Gansu Rare Earth Group, acquiring backbone enterprises in Sichuan and Shandong province. Ganzhou Rare Earth and Inner Mongolia Baotou Steel Rare-Earth Hi-Tech are the two most important rare earth enterprises in south and north China, which will help realize the target of constructing national rare earth industry.


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The joint study group of Yamaguchi University, Ehime University and University of Tokyo released a report on April 2nd saying they had discovered a new mineral that contains rare earth.

Japan is confirmed to have massive high concentration rare earth reserves in seas around Minami-Tori Shima. Japan believes these resources will not run out in 230 years, and the grade of rare earth is about 20 times higher than China's.

Japan has been importing rare earth from China, while China supplies 90% rare earth to the world. But the situation may change. Japan's rare earth reserves is 10 times more than China's, which can be used for hundreds of years. According to Lin Boqiang, Director of Energy Economy Research Center of Xiamen University, the discovery in Japan is in line with China implementing rare earth export quotas.


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Capacity utilization rate at the rare earth industry fell short of 40%. According to China Nonferrous Metals Industry Association President Chen Quanxun, rare earth overcapacity is very severe, with capacity utilization rate below 40%.

Chen Quanxun said capacity of aluminum, industrial silicon and rare earth has been in oversupply. The capacity utilization rate of industrial silicon was less than 30%, with capacity utilization rate of aluminum reaching 80%.

 "Capacity surplus of industrial silicon and rare earth is very significant." Said Chen Quanxun, "The most effective measure to ease capacity surplus is to expand utilization fields."

But China is weak in rare earth utilization, such as rare earth permanent magnetic material, fluorescent material and catalyst. High-end rare earth permanent magnetic materials are mainly produced by Japan, while only several enterprises including Zhongke Sanhuan, Ningbo Yunsheng and Advanced Technology & Materials Co., Ltd (AT&M) produce high-end rare earth permanent magnetic materials in China.

Many domestic enterprises mainly engage in low-end ferrite magnets production, and fierce market competition and high rare earth costs forced them to reduce rare earth utilization or even suspend production. In this context, the capacity utilization rate of rare earth fell short of 40%.

Annual earnings of rare earth enterprises in 2012 slid across the board. Rare earth exploration and separation are most profitable of the industry chain. Rare earth prices dropped sharply in 2012, and upstream profits were also down. Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Company ordered its upstream companies in north China to suspend production for three months. According to the company's annual report, net profits in 2012 were RMB 1.51 billion, down 56% from RMB 3.478 billion in 2011. The company reported with high inventories at hand, their cash flows were much lower than annual net profits.


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Rare earth prices have been falling since the start of 2013. Praseodymium-neodymium alloy prices rallied early this year, but transactions were muted, with prices stabilizing between RMB 400,000-405,000/mt, up RMB 15,000/mt from last year’s end. Prices for other rare earth categories maintained downward track.

In 1Q, prices for lanthanum oxide and cerium oxide dropped most steeply. SMM quotes for lanthanum oxide in late March were RMB 33,000-35,000/mt, while SMM quotes for cerium oxide were RMB 38,000-40,000/mt, down 34% and 22.4% respectively from the end of 2012.

In fact, rare earth prices have been weakening after the Chinese New Year holiday, with quotes for lanthanum oxide and cerium oxide leading decreases. Dysprosium oxide and dysprosium ferroalloy also fell. Transactions were muted, with most cargo holders standing on the sidelines.

According to Chen Quanxun, President of the China Nonferrous Metals Industry Association, the rare earth industry has been in severe oversupply, with the capacity utilization rate below 40%.

According to annual reports of listed companies, net profits at Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Company last year were RMB 1.51 billion, down 56.57% YoY.


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 A major rare earth production corporation has been formed in east China's Jiangxi Province as part of efforts to boost the industry's sustainable development.

The state-owned Ganzhou Rare Earth Group Co., Ltd., based in the city of Ganzhou, was founded through the merging of its key subsidiary Ganzhou Rare Earth Mineral Industry Co., Ltd. and some local rare earth companies, including Longnan Wanbao Rare Earth Co.

Thirty-six percent of China's middle and heavy rare earth reserves are in Ganzhou, which has experienced overexploitation since the end of the 1970s.

"From now on, Ganzhou will step up efforts to facilitate the merging and restructuring of the rare earth industry," said Liu Jianping, vice mayor of Ganzhou.

As the only prospector in Ganzhou,the group will be involved in rare earth mining, smelting, processing and trade.

In 2012, the sales revenues of the rare earth industry in Ganzhou reached 34 billion yuan (about 5.44 billion U.S. dollars), acccounting for one-third of the industry's revenues nationwide, according to Ma Rongzhang, secretary-general of the China Rare Earth Industry Association.

As the world's largest rare earth supplier, China serves more than 90 percent of global demand for rare earth metals, a group of 17 elements that are necessary to manufacture high-tech products ranging from flatscreen TVs to lasers and hybrid cars.

However, the country holds only 23 percent of the world's rare earth reserves. Decades of excessive exploitation have greatly damaged the environment.

In January, the Ministry of Industry and Information Technology (MIIT), along with 11 other authorities, said in a guideline that the government is encouraging mergers in the auto, steel, cement, shipbuilding, electrolytic aluminum, rare earth, electronic information, pharmaceutical and agriculture sectors.

The government will slash the number of rare earth companies through mergers and concentrate production capacity, the guideline says.

China's top rare earth producer, the Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co., announced last December that it would gain control of another 12 rare earth companies in order to form a megacompany.


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China has been the world's largest rare earth exporter, but due to the limited backward processing technology, it is only an export raw material-based country for a long time. While the Beijing Nonferrous Metal Research Institute has announced an exciting news on 24 March 2013 that, The National Engineering Research Center of China's Rare Earth Materials has been officially formed in Beijing. With the birth of the national team, China's rare earth industry will transform from resource exports into high-tech products output.

According to Ao Hong, the Vice President of the Beijing Nonferrous Metal Research, The National Engineering Research Center of China's Rare Earth Materials is one of the first research centers backed by the State Planning Commission, with the utilization of World Bank Loan. Previously, the intellectual and capital spent on the study of Chinese domestic rare earth project are relatively dispersed, resulting in lower technical content of rare earth products, long-term raw material exports.


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As for rare earth producers, the bad days seem to have come already. According to 2012 performance report from listed companies, the rare earth industry is experiencing tough time.

According to performance report from Inner Mongolia Baotou Steel Rare-Earth Hi-Tech from January 1st, 2012 to December 31st, 2012, net profit attributable to share holders of listed company has fallen from 50% to 60%.

Actually, Inner Mongolia Baotou Steel Rare-Earth Hi-Tech is not the only company experiencing tough time in the industry. According to performance report from Guangdong Rising Nonferrous Metals Group from January 1st 2012 to December 31st, 2012, net profit attributable to share holders of listed company rell by 60-80%.

According to Wangjian, Senior Wealth Management of Changjiang Securities, said that Chinese rare earth exploiters’ dumping of rare earth by massive mining at the expensive of environmental damage is the major reason behind profit contraction at China’s rare earth industry. Besides, the soft demand in China is also a major reason behind profit contraction at Chinese rare earth producers.

Not only large companies reported profit decline, small companies also have very harsh time. According to Yuan Zhibin, researcher from CIC, administrative means adopted by government forced many companies to exit market, the remaining companies also feel the pinch. The overcapacity and excessive exploration not only resulted in steady decline in rare earth prices . After Chinese government restricted exports of rare earth, domestic rare earth producers lose overseas market, which resulted in high inventories and big losses for them.

According to Lin Liangmin, researcher of China Webmaster, overcapacity and soft downstream demand is the major reason behind sharp contraction of profit at rare earth sector.

The soft downstream demand only refers to domestic market, while overseas demand is still brisk. However, China’s excessive exploration of rare earth made government to interfere in this industry by restricting exports. Given that rare earth demand in China is limited, the whole industry fall into recession.

Besides, production of rare earth from the US, Vietnamese, and Mongolia also exert impact on China’s rare earth producers.

Based on current market movement, the industry is unlikely to reverse weak momentum in the short term, and will lucrative profits shall no longer return this year.


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