Chalco gets rare-earth plan OK
Source: www.chinamining.org Citation: Global Times Date: August 07, 2014
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| An excavator digs up earth at a rare-earth mining field in Shanghai on July 24. Photo: CFP |
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Aluminum Corp of China Ltd (Chalco), China`s leading aluminum producer, said Wednesday the central government had approved its plan to set up a rare-earth enterprise, the latest move by the country to consolidate the rare-earth industry that has been grappling with problems such as overcapacity and illegal exploration.
The Ministry of Industry and Information Technology (MIIT) gave permission for a wholly owned subsidiary of Chalco, China Rare Rare-earth Corp, to integrate rare-earth companies in several provinces including Guangxi, Jiangsu, Shandong and Sichuan, Chalco said in a statement posted on its website.
Chalco shares climbed by the daily limit of 10 percent to 4.07 yuan ($0.66), a nine-month high, on Wednesday, reaching its highest level since November 5, 2013. The company is also dual-listed in Hong Kong, where its shares climbed by 9.4 percent to HK$3.74 ($0.48).
The MIIT`s approval gives a policy boost to the company to consolidate business within a sphere of business operations, mostly by geography, analysts said.
On Tuesday, Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co and Xiamen Tungsten Co announced that they had also been granted approval by the MIIT to undertake mergers and acquisitions to consolidate the industry.
China`s central government has been making efforts since 2013 to facilitate the establishment of six major industrial groups to engage in the mining, processing and utilization of rare-earth minerals.
Three other proposed rare-earth groups, which have not received official approval yet, would be set up by China Minmetals Corp, a major mining company, Ganzhou Rare Earth Group Co, a local nonferrous miner in East China`s Jiangxi Province and Guangdong Provincial Rare Earth Group in South China.
The highly valued rare minerals are used in defense system components and high-tech products such as smartphones.
"The founding of large rare-earth metal groups is intended to help improve the regulation and efficiency of the industry," Xu Haibin, a metal analyst with Ji`nan-based commodity consultancy Sublime China Information, told the Global Times Wednesday.
Sarah Wang, an analyst with Masterlink Securities Corp, was cited in a Bloomberg report on Wednesday as saying that "investors have more confidence about the company`s performance with the future injection of rare-earth assets."
Although China supplies 90 percent of rare-earth elements on the international market, analysts said, its rare-earth industry is challenged by overcapacity.
Xiamen Tungsten said in a statement on Tuesday that it will phase out obsolete capacity, enhance measures to protect the environment and crack down on illegal mining, processing and circulation of rare earths.
Rampant illegal mining and smuggling is also a problem, analysts said. China launched a campaign in 2012 to crack down on the illegal mining of rare-earth minerals, but Reuters cited Su Bo, a vice minister of the MIIT, as saying in January that the situation is still rife.
The consolidation should play a part in ensuring companies not buy or process rare-earth metals dug out by illegal miners, Wu Chenhui, a nonferrous metal analyst with chinaiol.com, told the Global Times Wednesday.
China`s rare-earth industry also faced pressure from abroad.
On March 26, the World Trade Organization (WTO) ruled that China`s control on export duties and quotas on rare-earth elements, tungsten and molybdenum had broken global trade rules.
But on April 17, the Ministry of Commerce spokesman Shen Danyang told reporters that "China will undertake the utmost effort" to appeal against the WTO ruling.
China later raised the cap on rare-earth output on July 24, allowing 10 percent more rare-earth metals to be mined in 2014 from the previous year.
According to Xu, consolidated companies, which are more efficient and powerful, could be in a better position to compete after the WTO ruling takes effect.
Wu at chinaiol.com said that a smaller number of larger rare-earth companies will also lead to more negotiating power with overseas clients.
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