China Rare Earth Group in talks to acquire Shenghe Resources
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Large mining truck at a mountain site. Illustrative image. |
China Rare Earth Group is in talks to acquire Shenghe Resources, a move that could further strengthen Beijing’s control over China’s rare earth industry and give the state-owned group a stake in US-based MP Materials, two people familiar with the matter said.
The talks have been underway since earlier this year, with China Rare Earth Group seeking a controlling stake in Shenghe, one of the sources said. The sources did not know when a deal might be announced or completed.
Shenghe owns stakes in several overseas companies, including about 3% of MP Materials, a major US rare earth producer. The US Department of Defense became MP Materials’ largest shareholder after making an investment in the company last year.
A successful acquisition would give China Rare Earth Group control of one of the few major Chinese rare earth mining and refining companies that still has private ownership. It would also mark another step in Beijing’s long-running effort to consolidate the sector under state control.
Rare earth elements are used in products including electric vehicles, wind turbines, electronics and defense equipment. China’s control over much of the global supply chain has become an important factor in its trade relations with the United States.
Shenghe acquired Australia’s Peak Rare Earths last year, adding another overseas asset to its portfolio. It remains unclear what would happen to Shenghe’s foreign holdings if China Rare Earth Group completes the acquisition.
The potential transaction could also raise questions because Shenghe is a shareholder in MP Materials, where the US Department of Defense is now the largest shareholder. MP Materials has repeatedly said that neither Shenghe nor the Chinese government controls its operations.
China Rare Earth Group, Shenghe Resources and China’s Ministry of Commerce did not respond to requests for comment.
The acquisition could also improve Shenghe’s access to China’s rare earth production quotas, one source said. Beijing uses quotas for mining, smelting and separation to manage domestic supply, with state-owned companies receiving quotas that are then allocated among their subsidiaries.
China does not routinely publish the full quota figures, but the allocations are closely watched by the global rare earth market because they provide an indication of potential supply.
China Rare Earth Group was established in 2021 after the reorganization of five state-owned companies involved in the rare earth industry. It is now China’s largest supplier of heavy rare earth elements.
