The integration of the rare earth industry has taken a step further: Guangsheng Nonferrous Metals has transferred China's rare earths free of charge

Reporter Li Zhe reports from Beijing

On January 2, 2024, Rising Nonferrous Metals (600259. SH) announced that the company's indirect controlling shareholder, Guangdong Rising Holding Group Co., Ltd. (hereinafter referred to as "Rising Group"), signed the "Agreement on the Free Transfer of Equity of Guangdong Rare Earth Industry Group Co., Ltd." (hereinafter referred to as the "Free Transfer Agreement") with China Rare Earth Group Co., Ltd. (hereinafter referred to as "China Rare Earth") on December 29, 2023, and Rising Group intends to directly hold its subsidiary Guangdong Rare Earth Industry Group Co., Ltd. (hereinafter referred to as "Guangdong Rare Earth") 100% of the shares of Guangsheng Nonferrous Metals were transferred to China Rare Earth free of charge.

In this regard, the relevant person of Rising Nonferrous Metals told the reporter of China Business News that after the transfer, the integration of China's rare earth to Guangdong's rare earth resources has been promoted, and the business line of China Rare Earth and Rising Nonferrous Metals is closer to each other, and it has entered a more professional platform of China's rare earth, which is beneficial to the long-term development of Rising Nonferrous Metals.

In recent years, China has strengthened the concentration of the rare earth industry and its international competitiveness through a series of measures. Since the formation of China Rare Earth in 2021, the pace of integration in this field has accelerated. Industry insiders believe that the entry of Rising Nonferrous Metals marks a further step in the integration of the mainland rare earth industry and promotes the healthy and orderly development of the industry.

Industrial consolidation

In the context of the integration of the rare earth industry, the "Free Transfer Agreement" signed by China Rare Earth and Rising Group was officially implemented.

According to the agreement, China Rare Earth acquired 100% of the equity of Guangdong Rare Earth Group held by Rising Group through the free transfer of state-owned shares. After the completion of the transfer, China Rare Earth Group indirectly holds 129 million shares of Guangsheng Nonferrous Metals through its wholly-owned subsidiary, Guangdong Rare Earth, accounting for 38.45% of the latter's total share capital. After the completion of the acquisition, the controlling shareholder of Rising Nonferrous Metals is still Guangdong Rare Earth Group, and the actual controller is changed from Guangdong State-owned Assets Supervision and Administration Commission to China Rare Earth Group.

According to the 2022 financial report of Rising Nonferrous Metals, the company has all the rare earth mining licenses that have been approved in Guangdong Province, and is the only legal rare earth mining right holder in Guangdong Province, with 3 rare earth mining enterprises controlling more than 120,000 tons of medium and heavy rare earth resources, and 2 tungsten mining enterprises with 64,000 tons of tungsten ore reserves in the certificate. At the same time, Dabaoshan Mine, a shareholding company, owns the largest copper-sulfur metal mine in South China. In addition, the third quarter report of 2023 shows that the operating income of Guangsheng Nonferrous Metals was 15.562 billion yuan, a year-on-year decrease of 15.30%, and the net profit was 166 million yuan, a year-on-year decrease of 21.65%.

Talking about the impact of the merger on the company, the above-mentioned person related to Rising Nonferrous Metals said: "This acquisition is an equity transfer between shareholders, and it will not affect the company's operation at present. After the transfer of China Rare Earth, the integration of Guangdong rare earth resources has been promoted, and after the transfer of China Rare Earth, the company's business line is closer, and there may be some measures in the future, but there is no specific content yet. Entering the more professional platform of China Rare Earth is beneficial to the long-term development of the company. ”

In recent years, the pace of integration of the mainland rare earth industry has been accelerating.

In November 2023, the executive meeting of the State Council emphasized the need to promote the high-quality development of the rare earth industry. The meeting pointed out that rare earth is a strategic mineral resource, and it is necessary to coordinate the exploration, development and utilization of rare earth resources and standardize management, coordinate the forces of production, education, research and application, actively promote the research and development and application of a new generation of green and efficient mining and metallurgical technology, increase the research and industrialization process of high-end rare earth new materials, severely crack down on illegal mining, ecological damage and other behaviors, and strive to promote the high-end, intelligent and green development of the rare earth industry.

In September 2023, Xiamen Tungsten Co., Ltd. (hereinafter referred to as "Xiamen Tungsten") signed the "Cooperation Framework Agreement" (hereinafter referred to as the "Cooperation Agreement") with China Rare Earth, intending to cooperate in the development of rare earth mining and smelting and separation industry in Fujian.

According to the cooperation agreement, the two parties plan to establish two joint ventures, with China Rare Earth holding 51% of the shares and Xiamen Tungsten (or its holding subsidiaries) holding 49% of the shares, to jointly operate the rare earth mines and rare earth smelting and separation industries controlled by Xiamen Tungsten (including the controlling shareholders of Xiamen Tungsten and its holding subsidiaries), and strive to further expand the scale of mining and smelting and separation.

In addition, the "Cooperation Agreement" also mentions that under the premise of complying with national policies, the mining joint venture company or other entities signed by both parties will start the expansion of the mining license of Zhongfang Mine and apply for a new mining license, and strive to maintain the mineable reserves under the mining license in Fujian Province at more than 200,000 tons of REO (rare earth oxides) for a long time. The smelting and separation joint venture company will invest in a new separation capacity of 5,000-10,000 tons in Fujian Province within 2-3 years after the cooperation.

These actions show that the mainland is strengthening the integration of the rare earth industry to enhance industrial concentration and international competitiveness. Industry insiders believe that this will help enhance the voice of the mainland rare earth industry in the international market and promote the healthy and orderly development of the industry. At the same time, considering the non-renewable nature of rare earths, integration will also be more conducive to the rational use and protection of resources.

Move forward under pressure

Rare earth, known as "industrial vitamin", is not only an important strategic resource, but also has broad application prospects in new materials, metallurgy, petrochemical and other fields. In recent years, permanent magnet materials have become the largest downstream application field of rare earths, accounting for as much as 42% of the demand.

At present, the world's rare earth mineral resources are relatively concentrated. In 2022, the global rare earth ore reserves will be 130 million tons, a year-on-year increase of 8.3%. Among them, 44 million tons in China, 22 million tons in Vietnam, 21 million tons in Russia & Brazil, and 6.9 million tons in India.

In terms of output, the global output of rare earth ores in 2022 will be 300,000 tons, a year-on-year increase of 3.45%. Among them, China has 210,000 tons, ranking first in the world, and the United States has 43,000 tons, ranking second in the world.

It is precisely because of the highly concentrated distribution of rare earth resources that the mainland has implemented strict control over rare earth production capacity for a long time to maintain its strategic position in the international market. However, in the early days, the domestic rare earth mining industry (especially medium and heavy rare earths) was easy to mine and high in profits, which gave rise to a number of "black rare earth" industries that were stolen and excavated.

In recent years, the domestic rare earth industry has undergone continuous remediation and consolidation. Especially after the establishment of China Rare Earth at the end of 2021, the industry pattern has been further optimized, and the concentration has been greatly improved. This measure not only improves the concentration and standardization of the domestic rare earth industry, but also optimizes the supply structure while maintaining the advantage of total resources. At the same time, the stability and controllability of rare earth supply have also been greatly improved, which has promoted the healthy development of the industry.

In addition, on December 30, 2022, the Ministry of Commerce issued the Notice for Public Consultation on the Revision of the Catalogue of Technologies Prohibited and Restricted from Export in China, which included "technologies for refining, processing and utilizing rare earths" in the list of prohibited exports.

In the past 2023, the Ministry of Industry and Information Technology has issued three batches of total control indicators for rare earth mining, smelting and separation. Among them, China Rare Earth, Xiamen Tungsten, China North Rare Earth (Group) High-tech Co., Ltd. (hereinafter referred to as "North Rare Earth") and Guangdong Rare Earth have all received corresponding quotas.

Different from previous years, the Ministry of Industry and Information Technology will issue three batches of rare earth quotas in 2023, and the total control indicators of rare earth mining, smelting and separation in 2023 will be 255,000 tons and 243,850 tons, respectively, a year-on-year increase of 21.4% and 20.7%. In this regard, industry insiders said that unlike the two batches of quotas in previous years, a new batch of rare earth indicators will be added in 2023, which has not been done in previous years, indicating that the supply side has been enlarged. From the perspective of supply and demand, the index volume is superimposed on the growth of import volume, while the demand side is under pressure, resulting in a mismatch between supply and demand in the market.

Judging from the performance of the company, the performance is not optimistic. Among them, the performance report for the third quarter of 2023 shows that the operating income of Rising Nonferrous Metals was 15.562 billion yuan, down 15.30% year-on-year, and the net profit was 166 million yuan, down 21.65% year-on-year. In addition, the performance of China Rare Earth, Northern Rare Earth and Xiamen Tungsten Industry has also declined to varying degrees.

Talking about the reasons for the decline in profits, Xiamen tungsten said that due to the decline in raw material prices and intensified competition, the prices of the main products of the rare earth business have declined, and the operating income has declined;

In the face of the pressure and challenges in 2023, industry insiders pointed out that with the gradual shift of supply and demand to balance and the continuous growth of demand for rare earths in emerging fields, the rare earth industry is expected to usher in a turnaround in 2024. New energy vehicles, humanoid robots, and other emerging industries that require permanent magnet products will continue to drive the growth of rare earth demand. At the same time, the irreplaceable role of rare earth products in the green economy will also bring new development opportunities to the industry.

According to the rare earth research report of Zheshang Securities, the global rare earth output is expected to be 130,000 tons in 2025, a year-on-year increase of 9%; Among them, the downstream demand for praseodymium neodymium oxide is expected to be -556 tons in 2024, and the supply-demand gap is expected to further expand to -3,505 tons in 2025.

(Editor: Dong Shuguang Proofreader: Yan Jingning)