The Chinese government on Wednesday approved a merger of rare earth mineral companies to form what the state propaganda newspaper Global Times described as a “behemoth” corporation, powerful enough to control the global supply chain for the vital minerals.
The new mega-corporation will be directly controlled by the State-owned Assets Supervision and Administration Commission (SASAC), an agency of the Communist government. The company will encompass about 70 percent of China’s rare-earths industry.
China, in turn, controls up to 85 percent of the world’s entire supply of rare earth minerals.
“After forming the new company, China’s rare-earth industry will shift from a scattered, small-scale status toward a systematic, comprehensive model,” China Rare Earth Industry Association deputy chief Chen Zhanheng told the Global Times.
An unnamed industry insider said the new company is expected to “optimize resources, ensure supply security and enforce stricter rules relating to production quantity as well as the export volume of rare earths.”
The Global Times framed the announcement as a slap in the face to U.S. President Joe Biden, who has expressed concerns about China’s dominance of the rare earth supply chain – especially given the importance of those metals to wind and solar power and electric cars, products the Biden administration wants to spend vast sums of American taxpayer money on purchasing or subsidizing.
Vice President Kamala Harris (C) looks at a heavy-duty electric truck on November 1, 2021. Harris announced $127 million in new federal funding for medium- and heavy-duty trucks that produce zero carbon dioxide emissions. (Photo by KENA BETANCUR/AFP via Getty Images)
The Global Times hooted with derision at Biden for thinking he could weaken China’s dominant position by making deals with Australian suppliers or belatedly developing American rare earth deposits.
Instead, Chinese analysts said the new corporate behemoth created by Beijing will give China even greater “clout and bargaining power at the bargaining table” and protect China against “Western bullying attempts.”
The Global Times noted rare earth prices soared during the Wuhan coronavirus pandemic due to reduced production, and the huge merger approved by SASAC is likely to drive prices up even further.
Chinese industry has such high demand for rare earth that China imports even more of the minerals, even after accounting for the lion’s share of the world supply. Political turbulence in Myanmar drove up prices because Myanmar mines are a major exporter of the metals to Chinese refineries. Human rights advocates complain that China’s huge purchases of metal are strengthening the military junta that currently rules Myanmar.
Chinese industry sources told the Financial Times on Thursday that Beijing wants to tighten its control over rare-earths to stabilize their prices, minimizing the risk of “wild price swings that cause headaches for end users.”
The theory is that prices will stop fluctuating so much if there are fewer companies competing with each other to deliver the metals. This will, in turn, make it easier for industries heavily reliant on rare earths to create solid long-term business models and secure investments.
“We can’t let market force determine how much rare earths should cost given their strategic importance. We can’t let market force determine how much rare earths should cost given their strategic importance,” said the industry source.
Other analysts told the Financial Times China has been planning since early in the Trump-era trade war with the United States to undermine American efforts to develop alternative suppliers.
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