Four Major Problems Faced by Rare Earth Industry in China

First, there is still severe overcapacity in primary products of rare earth. Though capacity of rare earth smelting and separation has decreased from 400 thousand tons to 300 thousand tons by integration, overcapacity is still a serious problem compared to 105 thousand tons of final production volume. In addition, illegal exploitation still exist driven by massive profits. Environmental disruption caused by illegal exploitation is not added into value of products, causing oversupply and low price of rare earth.

Second, inner competition of the industry is too fierce under the circumstance of serious overcapacity. Although production capacity of rare earth is integrated by the six large groups, subordinate manufacturers of them still have many independent decision-making units. In the market with oversupply, fierce competition among rare earth enterprises contributes to low international price. Individual decision-making do not consider environmental value and rare strategic value of resources, causing a mismatch between price and value. As an important strategic resource, rare earth in China is still mostly exported at a low price, equivalent of subsidizing other countries with domestic resources and environmental devastation.

Third, industry chain of rare earth industry is to move up. On the whole, rare earth industry in China is at the low end in global industry chain. Nearly 50% of rare earth production volume in China is exported as raw materials. Export volume of rare earth in 2016 was 47 thousand tons, most of which is from provinces including Inner Mongolia, Sichuan and Jiangsu. Major destinations of rare earth export are the U.S, Japan, and EU countries like Netherlands and Germany.

Forth, levels of resources and environmental protection remain to be improved and concentration ratio of the industry needs to be increased. To separate minerals, large amounts of chemicals are used for mineral leaching in rare earth exploitation, which permeate the soil and threaten both soil and water underground. New technology breakthrough and applications in green, effective mining & dressing and smelting & separation of upstream rare earth resource need to be realized.

Reference:

Research Report on Rare Earth Industry in China, 2017-2021

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