Northern Rare Earth Under Pressure – The Tension Mounts from November Economic Performance Meeting

Highlights

• China’s Northern Rare Earth holds strategic economic review meeting.
• Emphasized production recovery and market expansion in a challenging global environment.
• The company aims to establish two critical rare earth bases in Baotou, Inner Mongolia.
• Targets industry output exceeding 100 billion yuan by 2024.
• Leadership focuses on innovation, compliance, and global competitiveness.
• Amid Western nations’ efforts to diversify rare earth supply chains.

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Northern Rare Earth, a key state-owned player in China’s rare earth mineral industry, convened a November economic review meeting on December 12, 2024, in Baotou. The meeting, chaired by Liu Peixun, Chairman of Northern Rare Earth and Deputy General Manager of Baosteel Group, analyzed November’s economic operations and set critical strategies for the year-end and upcoming 2025 initiatives. Despite navigating a challenging market environment, the company demonstrated signs of recovery in production and operations, providing optimism for achieving annual targets. But it’s important to note the rare earth complex appears to be going through some challenging times, and the state-backed company must grow sales in an environment where Western nations seek to diversify from this very source.

The company underscored the importance of aligning efforts to meet production and operational goals by emphasizing safety management, reducing inefficiencies, expanding market reach, and mitigating financial losses. Meaning among other things, the need for more business expansion at a time that Western nations seek to implement less dependence on this same very company (and others in China).

Leadership emphasized a proactive approach to governance through tailored strategies for different subsidiaries, professional integration, and market-driven transformations. The meeting also highlighted a push for innovation, compliance, and responsibility-driven execution to establish Northern Rare Earth as a global leader in the rare earth sector. Looking forward, the company aims to accelerate efforts to build two critical rare earth bases, reinforcing its strategic significance within China’s industrial ambitions.

Before proceeding, here is a reminder of the two critical rare earth-based policies in China.

The two critical rare earth bases in China include the Bayan Obo mine in Inner Mongolia, which primarily produces light rare earth, and the southern region of the country, which controls medium-heavy rare earth.

China’s “two rare earth bases” policy aims to establish the nation’s largest rare earth new material base and the world’s leading rare earth application base, both centered in Baotou, Inner Mongolia. This initiative seeks to transform Baotou into the “world’s rare earth capital,” with a targeted rare earth industry output value exceeding 100 billion yuan by 2024, as reported in Yicai Global (opens in a new tab).

The policy focuses on two main objectives:

• Developing a Comprehensive Rare Earth New Material Base: This involves enhancing the entire rare earth industrial chain, from resource extraction to the production of advanced materials, thereby solidifying China’s position in the global rare earth market.
• Establishing a Leading Rare Earth Application Base: This entails promoting the use of rare earth materials across various high-tech industries, including electronics, renewable energy, and defense, to drive innovation and economic growth.

The latter point, of course, is mission critical for China’s ultimate planning to fund the momentum for control of the digital currency worldwide by 2049.

By concentrating these efforts in Baotou, China aims to leverage its substantial rare earth reserves to achieve high-quality industrial development and maintain its dominance in the global rare earth sector.

Key points about China’s rare earth policy include, first and foremost, the predominance of the Chinese sector.  China produces a significant portion of the world’s rare earths and processes nearly all of them, giving it significant control over the supply chain.  The Chinese utilize export quotas and tariffs to manage the number of rare earths leaving the country, often using national security concerns as justification.  Furthermore, the Chinese government has consolidated the rare earth industry into a few large state-owned enterprises, further strengthening their control.  On the environmental front, while China has implemented environmental regulations, some critics argue that they are not strict enough. 

Review of Northern Rare Earth’s November Economic Review Meeting

While the press release (opens in a new tab) reflects Northern Rare Earth’s ambition and focus on recovery, it raises several critical questions and assumptions posited by Rare Earth Exchanges.

First are the ever-growing market complexities and the need for adaptation. The acknowledgment of a “complex and severe market environment” suggests external pressures, yet no specifics are provided.  Of course, we know at least some of that pressure comes from the West, as nations are devising ways to reduce dependence on Chinese rare earth products.

Are these challenges tied to global demand shifts, geopolitical tensions, or domestic policy changes? How is the company positioning itself against competitors globally, particularly in light of rising rare earth production outside China?  The Chinese don’t address such matters directly in their press releases.

The release of operational metrics and call for transparency emphasizes goals and recovery but provides limited quantitative data on progress or challenges. What specific benchmarks of production or market share has Northern Rare Earth achieved in recent months, and how do they compare to prior years?  They keep this to themselves, not allowing the West to pry into such matters.

While safety management is highlighted, the framing appears reactive rather than proactive.

Are current safety practices in line with international standards, and what new measures are being implemented beyond risk investigation and rectification?

Then there are the assumptions regarding innovation and market expansion. The push for market expansion and innovation assumes an inherently receptive market. However, as we stated above, global trends indicate increasing rare earth diversification efforts by other nations. How will Northern Rare Earth secure dominance amid global shifts toward rare earth recycling and alternative sourcing?

Finally, we move on to the “Two Rare Earth Bases” construction. The release reiterates the goal of establishing “two rare earth bases” without elaboration on their geographic locations, operational focus, or strategic objectives. How do these bases align with China’s broader industrial and geopolitical goals, and what unique advantages will they provide? Rare Earth Exchanges provides a summary of the Two Rare Earth Bases mission above.

Overall, while the press release reflects a commitment to operational improvement and long-term growth, its broad language and lack of specificity leave critical uncertainties regarding execution, competitive positioning, and alignment with global trends in the rare earth industry. Of course, the shareholders of Northern Rare Earth are not your typical Western institutional holders demanding such transparency.