Rare Earth Mega-company Taking Shape
In a move that reflects China's intent to retain its dominance over the rare earth element (REE) market, the country's largest producer confirmed that it is taking steps to gain control of 12 other firms. If successful, it will effectively form the world's first REE “mega-company.”
Inner Mongolia Baotou Steel Rare-Earth (SSE: 600111) recently signed an integration agreement with 12 other rare earth producers in the Inner Mongolia autonomous region, China Daily reported. The move marks the boldest step yet in the establishment of the Northern Rare Earth Group and highlights the company's intent to concentrate the light REE industry primarily in Northern China.
The agreement, which will be valid for a one-year period, state that the 12 parties will each transfer a 51-percent stake to Baotou Steel Rare-Earth at no cost, according to China Daily.Although its reserves account for only 35 percent of the world's total, China remains the world's largest REE exporter, producing more than 90 percent of global output. Timing questionable News of the integration dates as far back as May 2011, when China's regional government issued an integration plan for upstream REE enterprises in the area. At the time, the Chinese government professed its intention to consolidate the industry over a period of two years, allowing the largest companies to take over smaller producers. Inner Mongolia Baotou Steel Rare-Earth was touted as the most likely candidate to benefit from a consolidated market. China justified the move by citing the need to eliminate small-scale rare earth producers due to environmental concerns. The State Council confirmed its aim to concentrate 80 percent of Southern China's heavy rare earth mining assets in three of the country's largest companies, local media reports noted at the time.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV