Vertical Integration of Chinese Companies on Rare Earth Minerals Production as Strategic Supremacy

China which is the hub of the 80% production of the global output in rare earth mineral production maintained the existing dominance and bargaining position in the global market.

Vertical integration is a strategic move in business techniques to extend its operationalization in the same company or industry in the way that the production process is controlled by the same company either upstream towards the source or raw material or consumers at downstream levels. It allows the company to make strong footprints in supply chains, cost control, and improve efficiency and enhance its competitive positions in this way.

Chinese companies are using this model as strategic supremacy in this context, as Chinese companies are sustaining this phenomenon that is keeping the supremacy contexts of the companies in the field of rare earth minerals production. Rare Earth Minerals are now the breath savings for the global economic order in every context while Chinese company’s mining and extractions are phenomenal in this respect.

China takes advantageous grounds, as China is taking the position of low-cost domestic supplies of raw material and at the same time promoting its production value-added manufacturing for an export mechanism that is one of the best strategies in this way. Rare earth minerals, a group of seventeen elements used in the manufacturing of semiconductors, defense systems, and batteries already remained at the central stage during China-US trade war impositions.

China which is the hub of the 80% production of the global output in rare earth mineral production maintained the existing dominance and bargaining position in the global market, especially in front of the USA which is the ultimate link of the flow and consistency of the global economic market. China has been dominant in the production of rare earth minerals since the 1990s, because of the major two factors behind that: low price and state-backed investment in infrastructure and technology dominated this market through Mountain Pass Mine in California while China snatched the position in the post-2000s.

Widely experienced for US curbs on the sales of technologies to China, the graphite restriction has heightened concern in the West that China might limit the exports of materials including the rare earth minerals whose productions it dominates. China accounts for 70% of the world’s mine production of rare earth minerals in 2022 followed by the United States Geological Survey(USGS) shows.

The Chinese companies carried out policies for the promotion of industrial integration under vertical positioning especially in the case of the production of rare earth minerals. Light rare earths are mainly located in Baotua city of Inner Mongolia, which accounts for half of the global supply chains while in the sea area, there is an abundance of rare earth minerals that accounts for 80% of the world’s total medium and heavy rare earth minerals which is one of the highest numbers in the count. The examples of the rare earth have to be given here so that their value essence can be judged that of La, one of the light rare earths was $6.50 per Kg, while that of Tb, one of the heavy rare earth minerals was $580 per Kg in April 2010.

Talking about the facts and values on the strategic importance of rare earth minerals in this way that how China has strategic advantageous conditions in front of the world in this area. China is keeping a consistent position as the dominant player in the supply chain of the 17 minerals which have exceptional usage in everyday life like that of electric gadgets, military weapons, electric vehicles, batteries, satellites, and many more so the supply is directly proportional to overall supply global soft, hard trade in every aspect. The value estimated by 2019 is stood by $1.5 billion – a fraction of the crude oil imports which stood at $ 1 trillion globally. Neodymium is used to make iPhones, Europium is used in the amount to produce red colors on the screen, and cerium is used to polish the phones during the manufacturing process. During the fiscal year 2020 $145.5 billion worth of iPhones sold in the global market which is also one of the main reasons behind the largest production of the iPhone in China.

In December 2021, China’s State-Owned Assets Supervision and Administration Commission (SASAC) approved the creation of the China Rare Earth Group. This entails the merger of three of the Chinese dominant companies in a single route. Different REEs are being used in various components for end use ranging from permanent magnets for electric motors and guidance and control systems while in defense there is use of the REEs is very important in this regard. Rees sensitivity affects usages in the defense mechanism similarly every F-35 Lighting fighter jet requires approximately 920 pounds of REEs while DDG-51 against destroyer requires around 5200 pounds of REEs. During the Pandemic Covid -19 and after the invasion of Russia by Ukraine in February 2022 this industry was substantially boosted in this way. REEs supply potential influencing up to $ 1 trillion while China was one of the major prominence seekers in this cause.

Technological superiority will ultimately decide the state’s superiority from the global perspective now this era is decisive in this regard and the age of technology has been decisive and punctual which will decide the new world order. There is no denying the fact that the USA has the arena and hedge of global power and has the sway of the technological hegemony in terms of production, centralization, and translations. There is the usage of the REEs in sea bass for the sensory mechanism of surveillance also known as undersea surveillance, new submarines also have a strong position in this way that has punctual mechanics of the REEs.

To conclude the discussion at the ends, there can be a vivid understanding regarding the importance of Rare Earth Mineral in such a way that it is being used by every sector of human life in current scenarios, the use is vital from defense to medicine, from education to traveling’s. From this observation ,there is high strategic value of the Rare Earth Minerals in this way.

Burree Sultan
Burree Sultan
BA Gold Medalist English. M.A( English), M .A ( IR) Brown Medalist M.A ( Political science and Pak Study ,South Asian Study ) Scholar ( Mphil /MS) and Researcher at National Defense University ( ISB ) Works at International Relationship/ Defense/ Strategic Studies / Sociology/ feminism /Islam/ Environment and Current Issues.