Shares in China’s largest rare earth producers rose on Monday after Beijing announced new regulations aimed at protecting the supply of these strategic minerals in the interest of national security. The move was seen by some in the market as potentially tightening the supply of rare earths.
The regulations, issued on Saturday by China’s State Council (or cabinet), take effect from October 1 and stipulate that rare earth resources – a group of 17 minerals used in products from magnets in electric vehicles to consumer electronics – belong to the state.
Shares in companies like China Northern Rare Earth Group High-Tech, China Rare Earth Resources and Technology, Rising Nonferrous Metals Share, and Shenghe Resources Holding jumped by 4.8%, 4.1%, 1.8%, and 0.5% respectively.
The new regulations follow draft rules issued in early 2021, with changes including the removal of earlier language that allowed companies engaged in rare earth smelting and separation to use imported supplies on top of allocated supply quotas.
“We believe there might be a further control over the smelting and separation of the imported ore,” Sinolink Securities wrote in a note.
China is the world’s dominant producer of rare earths and has taken various measures to tighten management of the industry, even as Western countries try to reshape supply chains to ease dependence on Chinese supply.
Some industry players sought further clarity on the new regulations, with one overseas rare earth buyer saying it might not impact the international business much for now, but the future is hard to tell. Analysts also noted that the new regulations could mean China may refrain from issuing a third batch of supply quota this year, unlike in 2023.