China’s supremacy in the rare earth industry is undeniable, with the country boasting the world’s largest known deposits of these critical minerals and maintaining a virtual monopoly on their mining and processing. The Bayan Obo mine in Baotou, Inner Mongolia Autonomous Region, stands as a testament to China’s dominance, earning the moniker “world capital of rare earths” through decades of strategic planning and political decisions.
The foundation of China’s current rare earth dominance was laid in the 1950s with the country’s nuclear program. Technological advancements in the subsequent decades led to the development of methods for separating raw rare earth materials, shifting the global division of labor. China transitioned from exporting raw materials for processing to becoming the primary processor of rare earths. By the mid-1980s, China had surpassed the United States as the world’s leading producer of rare earths, resulting in overcapacity and a subsequent drop in prices that led to the closure of several mines globally.
Despite its dominance, China’s rare earth industry faced challenges, including a fragmented market with thousands of mines competing fiercely and often disregarding environmental regulations. To address these issues and gain more control over pricing and quality, the Chinese government initiated a consolidation plan in 2002, aiming to streamline the industry and enhance its influence.
The consolidation efforts focused on creating two large companies for rare earths, one in the north and one in the south, based on the regions’ distinct mining characteristics. The plan encountered resistance, particularly in the south, where numerous companies operated independently. However, gradual progress was made, with the number of licenses issued decreasing, and exports becoming more centralized under government authorization.
China also tightened export quotas on rare earths, leading to international disputes and a subsequent ruling against China by the World Trade Organization in 2014. Despite these challenges, China continued its consolidation efforts, culminating in the formation of the “Big Six” companies dominating the industry by 2016.
In 2021, three of the Big Six merged to form the China Rare Earth Group (CREG), consolidating further control over the industry. The final step in the consolidation process occurred in 2024 with the takeover of Guangdong Rare Earth, leaving only two companies with official production quotas: the China Northern Rare Earth Group in the north and the China Rare Earth Group in the south.
Overall, China’s rare earth industry consolidation reflects a strategic effort to enhance control, streamline operations, and assert dominance in the global market.
