The "Regulations on the Administration of Rare Earths" was officially promulgated, ushering in a new chapter in the rule of law in China's rare earth industry

Interface News trainee reporter Tian Heqi

China's rare earth industry has ushered in the first special legislative norms.

On June 29, the State Council officially promulgated the Regulations on the Administration of Rare Earths (hereinafter referred to as the "Regulations"), which will come into force on October 1, 2024.

The "Regulations" have a total of 32 articles, which make it clear that the state implements a unified plan for the development of the rare earth industry, and encourages and supports the research and development and application of new technologies, new processes, new products, new materials and new equipment in the rare earth industry. It stipulates that rare earth production enterprises shall comply with laws and regulations on mineral resources, energy conservation and environmental protection, clean production, safe production and fire protection, so as to ensure the realization of green development and safe production.

The "Regulations" emphasize the need to strengthen the protection of rare earth resources. It is clear that rare earth resources belong to the state, and no organization or individual may encroach on or destroy rare earth resources, and the state shall carry out protective mining of rare earth resources.

On July 1, rare earth permanent magnet concept stocks rose sharply in early trading, and as of the close, Jiuling Technology (873305. BJ) rose more than 20%, Dagang Holdings (300103. SZ), Zhongke Magnetics (301141. SZ) 20CM daily limit, Huahong Technology (002645. SZ), Chong Hing Resources (600193. SH) 10CM daily limit. In addition, the Earth Bear (688077. SH), Sanchuan Wisdom (300066. SZ) rose more than 9%, Galaxy Magnet (300127. SZ) rose more than 5%, and Jinli Permanent Magnet (300748. SZ), China Rare Earth (000831. SZ) and so on.

The relevant person in charge of the Ministry of Justice and the Ministry of Industry and Information Technology said that the implementation of the "Regulations" is an opportunity to support enterprises to carry out the research and development and industrialization of new technologies, new processes, new products, new materials and new equipment, accelerate the transformation and upgrading of high-end, intelligent and green industries, and improve the quality level of the development of the rare earth industry.

The China Securities Construction Investment Research Report said that the "Regulations on the Management of Rare Earths" was issued, which regulated the development and utilization of rare earth resources for the first time in the form of administrative legislation, and proposed to strictly control the supply subject and quantity, establish a total regulation and control system, deepen the sustainable development pattern of the supply side of rare earths, build a win-win industrial ecology for upstream and downstream under the rule of law, coordinate the security of upstream strategic resources, support strategic emerging industries on the demand side, and support and encourage the comprehensive utilization of rare earth secondary resources.

Rare earth management faces many problems

"We are not selling rare earths at the price of 'rare', but at the price of 'soil'." On March 1, 2021, Xiao Yaqing, Minister of the Ministry of Industry and Information Technology, said in response to media questions on the "Regulations on the Administration of Rare Earths (Draft for Comments)".

Rare earth is known as the "industrial vitamin", with excellent magnetic, optical and electrical properties, and is widely used in metallurgy, military, petrochemical, glass ceramics, agriculture and new materials and other fields. Especially in the fields of military industry, electronics, automobiles, etc., it has an irreplaceable role.

According to the differences in physicochemical and geochemical properties between elements and the requirements of the separation process, rare earths can be divided into light, medium and heavy rare earths. Light rare earths mainly contain lanthanum, cerium, praseodymium, neodymium and other elements; Medium and heavy rare earths contain terbium, dysprosium and other elements.

There are many reasons why China's rare earths are sold at the price of "soil".

Rare earth production enterprises have environmental protection production problems. As early as 2012, the white paper "China's Rare Earth Status and Policy" made it clear that China's rare earth industry has experienced rapid development, but it is also accompanied by the problem of overexploitation of resources and damage to the ecological environment. For example, the radioactive elements associated with light rare earth ores have a great impact on the environment.

In addition, due to the imbalance between supply and demand in the market and the non-standard management of the industry, the price of rare earth products has seriously deviated from the value, which has affected the healthy development of the industry.

According to the white paper, China undertakes more than 90% of the world's market supply with 23% of rare earth resources, meeting the needs of the development of high-tech industries in all countries in the world, especially developed countries. However, after more than half a century of ultra-intensive mining, China's rare earth reserves and guarantee life have been declining, the resources in major mining areas have accelerated their decline, and most of the original mine resources have been depleted.

China is not a strong country in the rare earth industry, and there is a big gap between high-end rare earth materials and application technologies and developed countries such as Japan and the United States. "There are a lot of low-level and repetitive developments, and there are indeed relatively few high-level rare earth products, which is not conducive to technological innovation and scientific and technological progress." Xiao Yaqing said at the press conference of the above-mentioned State Council Information Office.

In the field of magnetic materials with the highest consumption value of rare earths, China's technical level has developed rapidly in recent years, and the number of patents applied for has grown rapidly, ranking second only to Japan in the world, but there is still a large gap with Japan and the United States, and a large number of low-end products are exported and high-end products are imported at high prices. For example, China is the world's largest producer of rare earth permanent magnets, with an average export price of only 46.59 USD/kg in 2019 and an average import price of 84.89 USD/kg.

Due to the preciousness and high profitability of rare earth resources, "black rare earths" have always existed in China.

Black rare earths refer to rare earth products that are illegally mined in China without government mining approval. On the one hand, due to the wide distribution, shallow burial and easy mining of rare earth mines in the south, regulation itself is very difficult.

On the other hand, the lack of laws and regulations has made the crackdown on black rare earths difficult to enforce. For example, China's mineral resources law mainly regulates the mining process, but the legal regulation of the buying and selling process is insufficient, which provides an opportunity for the trading of black rare earths.

The global rare earth mineral production landscape is changing

China has long ranked first in the world in terms of reserves, mineral production and consumption.

According to the data released by the United States Geological Survey (USGS), the total reserves of global rare earth resources in 2022 are about 130 million tons, mainly distributed in China, Vietnam, Brazil and Russia. Among them, China's reserves are 44 million tons, accounting for about 33.77%; In 2022, the global rare earth ore (REO) output will be about 300,000 tons, of which about 210,000 tons will be in China, accounting for about 69.98% of China's rare earth production.

In addition, according to the report "Medium and Long-term Supply and Demand Pattern of Rare Earth Resources" by Song Keyu, senior engineer of the Global Mineral Resources Strategy Research Center of the Chinese Academy of Geological Sciences, China's rare earth consumption has long occupied the first place in global consumption since this century, accounting for 75% of the world's consumption in 2022, an increase of nearly 10 times compared with 2000.

However, "China's rare earth resource advantage is gradually weakening. Zheng Guodong, an assistant researcher at the Institute of Mineral Resources of the Chinese Academy of Geological Sciences, and others pointed out in an article entitled "Changes in the Pattern of the World Rare Earth Industry and Problems Faced by China's Rare Earth Industry" published in the journal Acta Geosciencesa in March 2021.

Zheng Guodong et al. said that according to the estimation of the light and heavy rare earth allocation of China's light rare earth ore and southern ion adsorption rare earth ore, among China's 44 million tons of rare earth reserves, light rare earth reserves are more than 41 million tons, and medium and heavy rare earth reserves are less than 3 million tons.

Since 2009, there has been a boom in rare earth exploration around the world, and a large number of rare earth resources have been discovered in Greenland, Brazil, Canada, Vietnam, Myanmar, Laos, Norway and African countries, among which Myanmar, Vietnam and Greenland are rich in medium and heavy rare earth resources. With the mining of domestic rare earth resources and the discovery of new rare earth resources in other countries, the pattern of rare earth resources in the world has changed, and the advantages of mainland rare earth resources have gradually weakened.

In the view of Zheng Guodong and others, the global rare earth mineral production pattern is changing.

The United States, Myanmar and Australia are the three largest producers of rare earths outside China, with 26,000 tonnes, 22,000 tonnes and 21,000 tonnes respectively, accounting for 32.4% of global production. Since 2010, the United States, Australia and other countries have resumed the production of rare earth mines, and the output has increased year by year.

According to incomplete statistics, 261 companies in 37 foreign countries have developed a total of 429 rare earth projects, and newly launched 8-100,000 tons of rare earth mine capacity.

In addition, Zheng Guodong and others also proposed that China is no longer the only source of supply of rare earth smelting and separation products in the world.

The article mentions that in terms of rare earth smelting and processing projects, according to Antaike data, the global output of rare earth smelting and separation products totaled about 176,000 tons in 2019, a year-on-year increase of 21%. Among them, China's output is about 155,000 tons, accounting for 88.2% of the world's total.

Among them, Australia's Linus is the largest supplier of rare earth smelting and separation products outside of China, and the rare earth ore produced by its Mount Weld mine is smelted and separated through the Lamp plant in Kuantan, Malaysia, and the output has steadily increased, with an output of about 18,700 tons in 2019, accounting for 10.6% of the world's total.

In addition, Australia's Linas and the American Blue Line plan to establish a joint venture to establish a rare earth separation production line in the United States, with Linas providing 1,200 tons of raw materials per year, including heavy rare earths; MP Materials plans to restart the 40,000-ton rare earth separation line that is currently out of production in the United States; Australia's Peak Resources Limited plans to build a rare earth separation plant in the tees valley of the United Kingdom, and the rare earth ore produced at the Ngualla project in Tanzania.

The United States, Australia and other Western countries have been working hard to build a rare earth resource supply chain that does not include the participation of Chinese enterprises, and with the implementation of the above-mentioned rare earth smelting and separation projects, the existing pattern of global rare earth resource smelting and separation may be broken.

China's rare earth industry urgently needs the rule of law

Over the years, China has made efforts to implement protective mining of rare earths and promote the sustainable use of resources.

In the 1980s, China promulgated the Mineral Resources Law, which implements planned mining of mining areas planned by the state, mining areas of great value to the national economy, and specific minerals that are subject to protective mining by the state. In 1991, China decided to list ionic rare earth minerals as minerals for national protective mining, and implemented planned and unified management of all links from mining, metallurgy, processing to market sales and export.

In 2006, China implemented a total amount of rare earth mining control. In 2011, China adjusted the standard of resource tax for rare earth ores. China has also established a strategic reserve system for rare earths. Strictly control the total amount of exploitation and production, reduce the intensity of resource development, delay resource depletion, and promote sustainable development.

In January 2021, the Ministry of Industry and Information Technology (MIIT) announced the Regulations on the Administration of Rare Earths (Draft for Comments) and solicited opinions from the public. In June of the same year, the State Council issued the 2021 legislative work plan, in which the administrative regulations to be formulated and revised include the "Regulations on the Administration of Rare Earths".

"The formulation and promulgation of the "Regulations" is a major breakthrough in the legal construction of China's rare earth industry, and it is also an important institutional guarantee for the standardized and orderly development of China's rare earth industry." Ge Honglin, Secretary of the Party Committee and President of the China Nonferrous Metals Industry Association, pointed out in an interpretation article recently published on the official website of the Ministry of Industry and Information Technology.

In Ge Honglin's view, the "Regulations" encourage and support the compliant and orderly development of the rare earth comprehensive utilization industry, which will effectively reduce the industry's demand for non-renewable mineral resources and extend the mining and service life of China's mineral resources. Unfold.

Jiemian News noted that the "Regulations" also put forward a number of measures in the supervision system of the whole rare earth industry chain. For example, clarify the management requirements for rare earth mining and smelting separation. The competent department of industry and information technology under the State Council, in conjunction with relevant departments, shall determine rare earth mining enterprises and rare earth smelting and separation enterprises. Other organizations and individuals shall not engage in rare earth mining and rare earth smelting and separation.

At the same time, the "Regulations" proposes to establish a product traceability system, rare earth mining, smelting and separation, metal smelting, comprehensive utilization and rare earth products export enterprises should truthfully record the flow of rare earth products information and enter into the rare earth product traceability information system; Strict circulation management, no organization or individual is allowed to purchase, process, sell, or export illegally mined or illegally smelted and separated rare earth products.

According to the research report of China Securities Construction Investment, the implementation of the "Regulations" is good for upstream rare earth mining, smelting and separation enterprises, downstream rare earth applications such as rare earth permanent magnet enterprises, and comprehensive utilization enterprises with secondary resources as raw materials. In addition, it has important guiding significance for the supply side and demand side of rare strategic metals such as tungsten, molybdenum, antimony, tin, germanium, gallium, indium, etc., which is also good for other rare strategic metals and optimizes the industrial pattern.