Baotou Steel Rare Earth High-Tech Co and Jiangxi Copper Corp are set to launch a unified pricing mechanism on light rare earth materials nationwide, a move that is expected to give China a bigger say in international markets over the valuable resource.
China supplies more than 95 percent of global rare earth oxides and contains more than half of the world's reserves. Baotou Steel Rare Earth alone supplies 46 percent of the global market.
Rare earths are composed of 17 elements and are used in many high-tech areas ranging from wind turbines and hybrid cars to missile-guidance systems and mobile phones. Light rare earths have a much larger reserve and are easy to process.
The central government has indicated that it wants large companies to spearhead the consolidation of the country's rare earths sector to prevent the resource from being undervalued.
With China's moves to reduce export quotas, push for consolidation and crack down on illegal mining, some of the major rare earth oxides such as neodymium have rallied to 219,000 yuan ($32,000) a ton in August, up 60 percent from the end of last year.
Influenced by the price rises, about 200 rare earth mining projects worldwide are under way, Judith Chegwidden, managing director of the international metals research firm Roskill, was quoted by China Business News as saying.
Some mining companies in Mountain Pass in the United States, which also holds major rare earth reserves, have started to expand or resume their facilities to cope with the changes.
"Enhancing the concentration of the rare earth sector will benefit the Chinese side and give it a bigger say in the global markets," said Yu Zongsen, former secretary-general of the Chinese Society of Rare Earths.
To that effect, Inner Mongolia-based Baotou Steel Rare Earth, which controls almost all of the rare earth resources in the northern parts of China, is working with Jiangxi Copper Corp to launch a unified pricing mechanism for light rare earths.
Jiangxi Copper is also planning to consolidate the resources with two partners in Southwest China's Sichuan province, the other main light rare earth region after Inner Mongolia, by next year, said a source on condition of anonymity.
The alliance between Baotou Steel Rare Earth and Jiangxi Copper means they will virtually control the whole light rare earth market, analysts said.
Almost all light rare earth reserves are located in the Inner Mongolia autonomous region and Sichuan, while heavy rare earths come from Jiangxi, Guangdong, Hunan and Fujian provinces, as well as the Guangxi Zhuang autonomous region.
China's reserves of light rare earth stood at 50 to 60 million tons in 2008, figures from the Ministry of Land and Resources showed.
The National Development Reform Commission and the land and resources department of Sichuan province selected Jiangxi Copper, Sichuan Mianning Mining Co and Sichuan Hanxin Mining Industrial Co to take up the mantle in Sichuan, said the source.
Jiangxi Copper is expected to take over 10 local mines, while Mianning and Hanxin will take up the rest.
Industry sources said the central government wants to reduce 123 rare earth mines across the nation to less than 10, as well as cut down 73 processing firms to 20.
But the consolidation has not been progressing as expected, as the sector is highly scattered and governments usually struggle to balance competition from powerful companies, the sources said.