KEY POINTS
- China Rare Earth Group is seeking control of Shenghe Resources, sources say.
- Shenghe owns about 3% of U.S. rare earth producer MP Materials.
- A takeover could strengthen Beijing’s control over rare earth supplies.
China Rare Earth Group is in talks to acquire a controlling stake in Shenghe Resources, a move that could further consolidate China’s rare earth industry and strengthen Beijing’s influence over overseas assets.
The state-owned China Rare Earth Group has been discussing a potential acquisition of Shenghe Resources since earlier this year, according to two people familiar with the matter.
One of the sources said China Rare Earth Group is seeking a controlling stake in Shenghe, although there is no indication yet of when an agreement could be announced or completed.
Shenghe Resources has disputed reports about a possible transfer of control. In a filing to the Shanghai Stock Exchange, the company said it was aware of what it described as false overseas reports concerning a rare earth group’s alleged plan to acquire control.
The company said its controlling shareholder, the Institute of Multipurpose Utilization of Mineral Resources, had confirmed in writing that there were no plans to transfer its controlling stake to an external party.
Deal could affect MP Materials
A takeover would give China Rare Earth Group control over Shenghe’s interests in overseas companies, including its roughly 3% stake in U.S. rare earth producer MP Materials.
The ownership issue is significant because the U.S. Department of Defense became MP Materials’ largest shareholder following an investment last year aimed at expanding the company’s domestic rare earth magnet supply chain.
MP Materials operates the Mountain Pass rare earth mine in California and has repeatedly said that neither Shenghe nor the Chinese government controls its operations.
It remains unclear what would happen to Shenghe’s overseas holdings if China Rare Earth Group completes an acquisition. The sources also said they were not aware of how the potential transaction could affect the ownership structure involving MP Materials and the U.S. government.
China Rare Earth Group and China’s Ministry of Commerce did not respond to requests for comment.
Beijing seeks tighter control of rare earths
A successful acquisition would represent another step in China’s long-running effort to consolidate its rare earth industry under state ownership.
China Rare Earth Group was established in 2021 following the restructuring of five state-owned rare earth companies. It has since become the country’s largest supplier of heavy rare earth elements.
Rare earths are critical to the production of electric vehicles, wind turbines, electronics and defence equipment. China dominates much of the global mining, processing and refining supply chain, giving Beijing significant influence over international supplies.
The potential acquisition could also improve Shenghe’s access to government-controlled production quotas, according to one source.
China uses quotas covering rare earth mining, smelting and separation to regulate domestic production and manage supply. Access to those quotas is generally channelled through state-owned companies and their subsidiaries.
Shenghe expands overseas presence
Shenghe has been building its international presence in the rare earth industry. Last year, the company acquired Australia’s Peak Rare Earths, adding another overseas asset to its portfolio.
A takeover by China Rare Earth Group would therefore place a major state-owned rare earth producer in control of a company with interests spanning both China and overseas markets.
The potential transaction comes as rare earths become increasingly important to industrial supply chains and geopolitical competition, particularly because of their role in advanced manufacturing, clean energy technologies and defence applications.
The sources said they did not know when the talks might result in a formal agreement, meaning the proposed acquisition remains subject to further negotiations and could still change.
