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Rare Earth “Mega-company” Taking Shape

The announcement had an immediate effect on the market, with the cost of most REEs defying analysts' predictions with steep price increases; dysprosium, for example, doubled in value. However, this rally proved to be short-lived, and prices plummeted back down in 2012.

Though the plan has been in the making for years, the timing of Baotou Steel Rare-Earth's most recent move was a curveball as it came straight after the company's announcement that it will continue production halts at its factories for a third consecutive month in an effort to stabilize slumping market prices.

Plan outline

Details of the latest plan suggest there are 35 rare earth miners and processors involved in the framework. Baotou Steel Rare-Earth will be in charge of mining, selection of mine locations, processing, management and separation, according to China Daily. In April last year, the organization offered subsidies to 22 upper-stream rare earth companies that had closed as a result of struggling market conditions. It also opened up an integration process to another 13 enterprises.

The China Daily article states that the final list of companies to be integrated includes Baotou Jinmeng Rare Earth, Baotou Xinyuan Rare Earth Hi-tech and New Material and Baotou Xinye New Material.

When the integration is complete, Baotou Steel will be responsible for marketing and sales strategy, as well as the industry and product layout of all parties concerned. For now, it will support the 12 parties in areas relating to production and export quotas.

Only the beginning

Investors will be watching the effects of this scheme with much interest, especially considering comments made last year by Baotou Steel's general manager, Zhang Zhong.

Zhong said that if this initial stage is successful, Baotou Steel will also expand and will eventually team up with major rare earth producers in the provinces of Gansu, Sichuan and Shandong, according to China Daily.

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