In May 1927, the Ulanqab grassland in Baotou, Inner Mongolia, welcomed a group of scholars from China and Sweden. They trekked 4 million square kilometers northwest in search of a large mineral deposit. Finally, Ding Daoheng, a young geologist on the team, made a major discovery. On a barren hill north of Amut (Amu), Ding Daoheng saw a dense ore appearing on the mountainside. "Once at the bottom of the mountain, you can see a lot of iron ore scattered along the side of the ditch. The closer you get, the richer the ore. Looking up at the top of the mountain, you'll be standing tall, with black spots, rotten spots, so you know where the deposits are." In his investigative report, Mr. Ding later described how the mine was discovered and identified it as a valuable iron ore deposit. It was during this expedition that Bayan Obo Mine, the pearl of the Mongolian steppe today, began its glorious history. What Ding didn't realize, however, was that hidden inside what he thought was an iron ore deposit was something even more significant -- the world's largest deposit of rare earths.
Data from the US Geological Survey showed that as of 2017, China's rare earth reserves accounted for 37 percent of the world's proven reserves, ranking first in the world, with Baiyun Obo mine accounting for 83 percent of the total domestic reserves, making it a major producer of light rare earths. But China has long exported about 90% of the world's rare earths, making it the world's most important supplier to the industry. Although this position comes from the unique mineral advantage, but also the inevitable result of the law of economic development.
At the beginning of reform and opening up, the country's industrial base was weak and it had to rely on exporting raw materials to earn foreign exchange. Rare earths became one of the most important exports. Export rebates were even used to encourage resource exports. In the 1990s, the rapid development of the neodymium magnet industry led to a rare earth gold rush in China, where a large number of unauthorized private enterprises began to mine rare earth minerals. Undisciplined competition among exporters has depressed prices of rare earth products, allowing the world to enjoy cheap, easy-to-use electronics. Japan, which invented NdFeb, is the biggest winner. Thanks to their mastery of advanced magnet technology, Hitachi Metals and Shin-etsu Chemical of Japan have been able to import cheap raw materials from China and process them into high value-added products that are sold around the world. Japan's position as the largest supplier of NdFeb magnetic materials has been reinforced by a large supply of high-quality and inexpensive rare earth materials.
But China must bear the industry's negative costs. The Baiyun Obo mine, the largest in the world, has been over-exploited for many years, with only one-third of its reserves remaining. The medium and heavy rare earth deposits in the south have been mined for only 15 years.
To make matters worse, the process of extracting rare earths involves repeatedly rinsing the ore with acid. This way of washing naturally produces a lot of sewage residue, serious pollution of the environment. This kind of self-harming service to the world is something no country can tolerate for a long time, and it's time for China to do it.
China's move
In 2010, the Chinese government began restricting exports of rare earth minerals by introducing an export quota system. In 2011, it announced the implementation of a special invoice management system for rare earth mining, production and value-added tax. In 2012, the Ministry of Industry and Information Technology issued a white paper titled "The Status Quo and Policies of China's Rare Earth Industry". Subsequently, measures were taken to rectify the domestic rare earth order, control the "black industry" of rare earth, and shut down mining and processing enterprises that did not conform to environmental protection and industrial policies.
In 2014, China's export quota system was ruled illegal by the WTO and had to be scrapped. But instead, the government has resorted to production controls, continuing to reduce rare earth production in the name of environmental protection.
Under the multiple control of the source, the price of the magnetic materials used in NdFeb has risen year after year, bringing rich profits to the upstream rare earth production enterprises.
Controlling raw materials is only the first step.
In terms of downstream metal purification and deep processing, China has also put a lot of effort into the establishment of scientific research facilities, investment in the operation of the world's largest rare earth research unit - Baotou Steel Rare Earth Research Institute. Private enterprises continue to explore high performance neodymium magnet manufacturing technology, expand production capacity, enhance competitiveness, and quickly occupy the market. Zhongke Sanhuan, Hengdian Dongzi and Ningbo Yunsheng are China's leading producers of magnetic materials, and together with other large and small industries, they provide 70 percent of the world's magnet output.
At the same time, industry and academia also use patent tactics to seize the commanding heights of intellectual property rights. Since China filed its first rare earth patent in 1983, the number of applications has grown rapidly every year, and in 2011 it surpassed all other countries combined.
After a multi-pronged effort, the return came as expected.
In 2018, China unexpectedly became the world's largest importer of rare earth minerals. Raw ore from Myanmar and the United States is shipped to China, processed into blanks and sold back to Europe, the United States or Japan. This fact, in the words of British expert Castillo, means that China has turned its back on exporting primary products and become a high-value-added smelting and processing industry.
