Local Governments Lobby for Higher Rare Earth Quota

By Song Yao
Published: 2011-03-18

By Song Yao
News, page 4 , issue 509, March 7th
Translated by Tang Xiangyang
Original article:

China has decided to lift the one-and-a-half-year suspension on applications for opening new rare earth mines on June 30.

Still four months to go, but provincial governments and state-owned enterprises (SOEs) have started competing for resources and rounding-up territories, hoping to launch straight into operation once the suspension is lifted.

Prior to the suspension – imposed to prevent over-exploitation of rare earth – the Ministry of Land and Resources would allocate annual quota for rare earth development to local governments between March and May.

The quota would determine mining volume and the number of new mines in each of the rare earth rich provinces. Now, various local governments – often in collaboration with SOEs - are fighting for higher rare earth development quota.

Strategies for Lobbying
In early March, state-owned China Minmetals Corporation (Minmetals) has signed a strategic cooperation agreement with Heyuan City, Guangdong Province, to jointly explore and develop rare earth resources. This is in addition to agreements signed last year with Chenzhou City, Hunan Province, and Zhushan City, Hubei Province.

Meanwhile, another SOE, Aluminum Corporation of China (CHINALCO) has teamed up with local government owned Guangxi Nonferrous Metals Group to gain entry into the rare earth industry in Guangxi province.

At present, 15 provinces in southern China have rare earth resources. One of the strategies used by various local governments in lobbying for higher rare earth development quota is questioning the allocation formula.

In 2010, Ganzhou City of Jiangxi Province had gained the highest mining quota. Of the 12,200 tons nationwide annual rare earth mining quota set by the central government, Ganzhou City was allocated 7,480 tons.

The high quota for Ganzhou City is because its rare earth resources accounted for 60% to 70% of the national reserves, according to government statistics, but the data is disputed by other rare earth rich provinces.

One local official of Chenzhou City, Hunan Province, who declined to be named, said the current statistics only include rare earth resources that had been discovered so far, but the real volume of rare earth across China had yet to be determined.

If given more time and resources to conduct explorations and close inspections, "Chenzhou may turn out to have resources that match Ganzhou,"said the above official.

In agreement with the above stand, Shao Weigen, deputy director of the Land and Resources Bureau of Heyuan City, Guangdong Province, said:"The most urgent matter now is to figure out how much rare earth reserves each province has, only then can we work out a fair annual mining quota."

Rare Earth Explorations
To ascertain the exact volume of rare earth reserves, exploration right is needed. Several central government-owned companies are already mapping their influence at local level, in hope of becoming the driving force in rare earth exploration and opening new mines. 

On February 10, the Chinese government announced the move to establish Ganzhou City as the national rare earth mining zone; in the future, such status is expected to extend to other rare earth rich cities in Hunan, Guangdong, and Guangxi provinces.

The emerging rare earth mining cities would have to comply with the government's wish of having a more consolidated and high-end rare earth industry, and that needed industry leadership to push for mergers and technology upgrade.

Who would be the leader? Minmetals, CHINALCO and Bao Steel Rare Earth Holdings Co, Ltd are all hoping to fit into the shoe. But to gain such status, they would first need to look after the interests of the local governments.

Minmetals, for instance, has joined hand with local government-owned Hunan Non-Ferrous Metals Holding, in order to gain access to integrate the rare earth industry and conduct future explorations in Hunan province. 

Minmetals also pledged to relocate its Minmetals Non-Ferrous subsidiary to Changsha, capital of Hunan Province, and promised to invest 10 billion yuan to promote Hunan Nonferrous Metal Holding, and helping it to become China’s top 500 companies.

CHINALCO too adopted similar strategies to gain entry into Guangxi province.

As for Guangdong province, the local government has yet to decide on which company to team-up with.