September 02, 2009

China's Rare Earth Monopoly

China mines 90% of the rare earth elements in the world and 75% of China's reserves of rare earth products are found in the Inner Mongolia Autonomous Region. A number of reports are speculating on a recent decision by Beijing to limit exports of rare earth metals. Some believe China is hoarding the elements which are vital for many high tech industries. Neodymium, for example, is essential to the batteries used in the Toyota Prius and other hybrid vehicles. But Beijing is also guiding Inner Mongolia to consolidate the industry and shore up rare earth prices. There are many mining businesses and rare earth producers but one company is singled out as the new dominant firm: Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Company, Ltd., or IMBREHT. The firm was established in 1960 and is listed on the Shanghai Securities Exhange as a domestic A share (SS:600111). Its earnings are down considerably for the first half of 2009. Consolidation around IMBREHT will form a virtual monopoly on rare earth elements and make the company a force to be accepted in the medium to long term....

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