Frik Els reports that in order to crack down on illegal mining, pollution and modernize their mostly low-tech industry, China consolidated its rare earth industry under six large organizations in 2014. By far the leading rare earth producer, is China North Rare Earth Group Co (formerly Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co). Representing 34% of REE consumption in volume terms, a solid cerium price means other more valuable, but less abundant rare earths can also be mined profitably. The CNRE giant mine in Bayan Obo, Inner Mongolia near Baotou City, produces more than the rest of the rare earths mines in the world combined, and does so as a byproduct of iron ore mining. The 470 million tonne iron deposit was discovered in 1927 and REEs a decade later. According to some estimates, Bayan Obo boasts 70% of the world proven REE reserves at more than 40 million tonnes.
After consolidating five rare earth separation and refining businesses little over a year ago, CNRE has a combined rare earth processing capacity of 73,500 tonnes per year. That compares to 2014 total global mine production of roughly 110,000 tonnes (total illegal mining is put as high as 40,000 tonnes). The price of iron ore fell back to below $40 a tonne on Thursday, a level last seen in 2007 and down 8% already in 2016 following a near 40% decline last year. The flood of cheap new supply, mainly from Australia and Brazil have hit smaller producers hard, but domestic Chinese mines which struggle with low grades (only around 20% Fe) and high production costs have been most affected. According to some estimates around 8% of domestic Chinese iron ore mine production exited the market in 2015. With little prospects of a recovery in prices roughly the same reduction in output is expected this year. Melanie Debono of Capital Economics says lower iron ore output which would cut into REE production (specifically the light REE cerium).
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