Twenty-two enterprises signed agreements with the Baotou National Rare Earth Hi-Tech Industrial Development Zone on Aug. 8, and plan to invest in rare earth deep processing projects in the zone. China Business News quoted An Sihu, assistant director of the zone's management committee, as saying that some of the 22 enterprises are foreign-funded enterprises.
As the government did not issue specific policies on the utilization of rare earth resources prior to 2010, some areas in China once permitted foreign-funded enterprises to establish rare earth separation enterprises and export related primary products to other countries or regions for further extraction.
"Foreign enterprises are now no longer permitted to invest in domestic rare earth separation enterprises, leaving investing in rare earth deep processing their only choice," said an official from the Baotou municipal government.
China's rare earth deep processing techniques are far behind that of developed countries, such as Japan and the United States, and foreign companies have blocked related technology exports for a long time. The reason behind foreign enterprises' investments in China's rare earth deep processing sector lies in an unlikely and over-rapid rise in China's rare earth output and export volume in a rather long period of time and in the increased global demand for rare earth.
Over recent years, foreign enterprises have continued to shift their rare earth fluorescent powder production facilities to China because of China's advantages in rare earth resources and production cost as well as China's preferential policies relating to the rare earth sector. A total of six foreign enterprises have established or plan to establish rare earth fluorescent powder enterprises in China so far.
Over 90 percent of rare earth output in China is exported to Japan, the United States and Europe every year. Rare earth exported to Japan accounts for about 50 percent of China's total rare earth exports.
South Korea, which has advanced electronic, telecommunications and automobile industries, is also considering investments in China's rare earth deep processing sector. In June, 2010, a consortium of POSCO and the Korea Resources Corporation bought a 60 percent stake in Baotou Yongxin Rare Earth Trade Company for about 60 million yuan. The acquired enterprise has a microcrystalline NdFeB alloy and Y-Mg alloy deep processing project in Baotou's rare earth high-tech zone.
"The global rare earth demand is expected to reach 200,000 to 210,000 tons in five years and China's domestic demand will stand at 130,000 to 140,000 tons," said Wang Caifeng, an inspector at the Department of Raw Materials Industry under the Ministry of Industry and Information Technology.
In 2009, China's rare earth ore output hit 129,400 tons and refined and separated rare earth product output stood at 127,300 tons, supplying over 95 percent of the global demand.