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The inspection team has gradually returned to Beijing following their visits to various regions across China. On November 14, an official from the Raw Materials Division of the Ministry of Industry and Information Technology spoke to reporters. According to this official, the Ministry of Industry and Information Technology, along with multiple departments including public security, supervision, land, and environmental protection, formed a national rare earth joint inspection team. This team was split into two groups—one operating in the north and the other in the south—to oversee critical areas nationwide. The northern inspection team was led by Chen Yanhai, Director of the Ministry's Department, while the southern team was headed by Jia Yinsong, Director of the Rare Earth Office. The China Rare Earth Industry Association also participated in supervisory efforts.
The inspection team discovered approximately 20,000 tons of rare earth materials in Inner Mongolia and Ningxia. "This number is astonishing," the official noted, adding that it surpasses the total amount of rare earths exported last year by 2,000 tons. The nationwide crackdown on the rare earth industry has yielded significant results. Our sources at the Ministry of Industry and Information Technology and the association have informed us that the ministry is currently summarizing the internal findings and formulating strategies to combat illegal rare earth activities. They aim to create effective, long-term solutions to regulate the rare earth market and submit their summary report to the State Council.
Six illegal processing facilities were dismantled during this operation. Just a month ago, the Ministry of Industry and Information Technology issued a notice ordering the verification and rectification of rare earth violations in specific provinces. The rare earth crackdown began in earnest then, with localities instructed to complete their verification and rectification work by November 15. By the end of October, all regions were required to submit initial verification and rectification reports to the Ministry of Industry and Information Technology.
"Over the past month, the joint inspection team led by the Ministry of Industry and Information Technology conducted spot checks on the progress of these actions," a participant in the rare earth crackdown stated. Prior to this, local governments had already coordinated inspections involving multiple departments, including industry, land, public security, environmental protection, taxation, and industry and commerce. These inspections targeted enterprises engaged in illegal mining, production, sales, and tax evasion, ordering them to cease operations and dismantle their equipment. Legal responsibilities were also pursued accordingly.
Our reporters learned that the southern inspection team visited Guangdong and Jiangxi, while the northern team inspected Inner Mongolia, Ningxia, and Gansu. On November 4 and 5, Chen Yanhai, leading the National Rare Earth Joint Inspection Team, traveled to Baiyin City in Gansu Province to oversee the rectification of rare earth resource violations. The inspection team visited Gansu Hengfeng Chemical Co., Ltd. and Bailan Lanao Rare Earth Co., Ltd., examining their production workshops and illegal activity rectifications.
Chen Yanhai emphasized the importance of strictly enforcing rare earth resource protection policies and regulations to ensure sustainable development. The most severe instances of illegal rare earth activities occurred in Inner Mongolia and Ningxia. "Experts from the China Rare Earth Industry Association also assisted the Ministry of Industry and Information Technology in their oversight duties," the reporter added. "This individual has extensive experience working at Baotou Steel and brought advanced professional identification tools."
According to the responsible person, six illegal rare earth processing facilities were shut down in these regions, resulting in the confiscation of 20,000 tons of rare earth materials. "This quantity exceeds the annual national export volume," the reporter noted. Official statistics reveal that China exported 18,600 tons of rare earth products in 2011. Thus, the illegal rare earth materials seized in Inner Mongolia and Ningxia alone surpassed the previous year's total exports.
The "black" rare earth industry chain extends beyond these areas. Participants in the inspection shared that some criminals have even ventured offshore, openly engaging in trade. Ma Rongzhen, Secretary-General of the China Rare Earth Industry Association, previously highlighted that foreign customs data showed China’s rare earth exports were 1.2 times higher than domestic records in 2011, indicating a smuggling rate of 120%.
The newly formed China Rare Earth Association, listed earlier this year, prioritized addressing industry misconduct. In June, the association issued a public notice seeking leads on illegal mining, smelting, processing, and smuggling of rare earths. The association's leadership revealed to reporters that they received 31 reports between June and July, subsequently forwarding these to the Ministry of Industry and Information Technology and the Ministry of Environmental Protection.
The black rare earth industry chain spans numerous locations, including Ningxia, Gansu, Shandong, Hebei, Zhejiang, Henan, Guangdong, and others. Given the stringent registration requirements for rare earth smelting and separation enterprises, these entities often opt for deep processing ventures like metal processing or polishing powders to evade oversight. Investigators found that the illegal industry chain covers every stage, from mining and smelting to deep processing and application. Illegal extraction, smuggling, and sales have created a comprehensive network across multiple provinces and autonomous regions.
Producers within this black industry chain bypass environmental and resource costs, ignoring national quotas and directives. As long as there is demand and profit, they ramp up production, recklessly depleting rare earth resources and exporting them at bargain prices. This rampant activity has caused severe environmental damage.
Leaders of several rare earth enterprises expressed concern over the unchecked proliferation of illegal mining and processing, negatively impacting legitimate businesses. They hope regulatory bodies will take decisive action. "Black rare earth products sell at significantly lower prices than those from legitimate enterprises, causing rare earth product prices to plummet. This squeeze on legal enterprises’ profits is alarming, and the scale of black market operations remains uncertain," the association leader remarked.
A long-term solution is essential. The association leader noted that the rare earth crackdown has already influenced the market positively. Recently, rare earth prices have rebounded slightly, partly due to the removal of 20,000 tons of illegal materials affecting supply-demand dynamics. Baichuan Information Network reported that bismuth oxide prices now range from 340,000 to 360,000 yuan/ton, up by over 20% compared to late October lows. Other factors contributing to the price increase include coordinated production halts and storage among rare earth enterprises.
Despite this, uncertainty persists regarding future price trends. Market demand remains weak, and skepticism exists about whether the current actions can fully eliminate illegal operations. Critics argue that these illicit networks are deeply entrenched in local economies, making eradication difficult. Formal rare earth firms fear resurgence once the crackdown ends.
The Ministry of Industry and Information Technology is compiling a summary of the rare earth rectification efforts, analyzing issues identified during inspections, and formulating measures to prevent illegal activities. Establishing a long-term regulatory framework is crucial. Challenges remain, such as motivating local governments and fostering inter-departmental collaboration.
To address these concerns, the China Rare Earth Industry Association appealed to the industry to boycott products from illegal chains, promote the use of rare earth special invoices, and track product transactions across the supply chain. The joint inspection team reiterated that rare earths are non-renewable strategic resources. Strict access controls, resource management, and enhanced enforcement against illegal entities are vital. Recently, the ministry announced the first batch of enterprises approved under new industry access conditions, reflecting the government’s commitment to regulating the sector effectively.