China urges six rare earth firms to consolidate the industry by year end

[SHANGHAI] China is urging the country's top six rare earth companies to consolidate all miners and processors in the sector by the end of this year, a move which is expected to push up prices.

China is responsible for more than 90 per cent of global rare earth production, giving it a chokehold over the supply of a group of elements used in sectors such as defence and renewable energy.

China's six biggest rare earth groups must submit timetables for the restructuring, and will be subject to government inspections on a seasonal basis, the Ministry of Industry and Information Technology (MIIT) said in a statement on its website.

The country is searching for new ways to strengthen its pricing power over rare earth metals following its failure to overturn a judgment by the World Trade Organisation (WTO) last year which branded the country's export tariff and quota system as discriminatory.

China's commerce ministry decided at the end of last year to abolish the quota system on rare earths as well as tungsten and molybdenum, and it said last week that it would remove taxes on rare earth exports from May.

Bringing output under the control of major state-led groups will help it regulate the sector and serve its campaign to eliminate illegal production and smuggling.

The consolidation is expected to improve market order, reduce rare earth supply and push up prices of the metal in the future, official Shanghai Securities News reported on Thursday, citing people in the industry.

REUTERS