China Rare Earth Group Seeks Controlling Stake in Shenghe Resources
State-backed group aims to consolidate Shenghe's assets, including a 3% stake in US-listed MP Materials, to tighten supply chain control.
Key points
- China Rare Earth Group is negotiating a controlling stake in Shenghe Resources to consolidate state control over private mining assets.
- The deal would transfer an approximately 3% stake in US-listed MP Materials, a key defense supplier, to Chinese state ownership.
- Acquisition is expected to grant Shenghe better access to Beijing's strictly regulated rare earth production quotas.
China Rare Earth Group is in advanced negotiations to acquire a controlling stake in Shenghe Resources, according to two sources cited by IDNFinancials. The talks, which have been ongoing since early this year, represent a significant consolidation move intended to bring one of the largest private rare earth miners under direct state management.
The proposed acquisition would grant the state-owned entity ownership of Shenghe’s strategic overseas holdings, most notably an approximately 3% equity position in MP Materials. This US-listed company is critical to the Western defense sector, having recently secured investment from the US Department of Defence, which now holds the largest shareholder stake.
Strategic Stake in US Defense Supply Chain
Shenghe Resources expanded its international footprint last year through the acquisition of Peak Rare Earths in Australia. The current deal creates immediate regulatory and geopolitical questions regarding the indirect Chinese ownership of a company where the US military is the primary investor. MP Materials has publicly maintained that neither Shenghe nor the Chinese government exercises control over its operational decisions.
Quota Access and Industry Consolidation
Beyond asset ownership, the acquisition is expected to provide Shenghe with more stable access to Beijing’s production quotas. China strictly regulates rare earth mining and smelting through a quota system allocated primarily to state-owned entities. Integrating Shenghe into this structure could streamline supply chain allocation for the group, which became the nation’s largest heavy rare earth supplier after its 2021 reorganization.
Unclear Timeline for Deal Completion
No specific timeline has been set for the announcement or closing of the transaction. China Rare Earth Group, Shenghe Resources, and the Ministry of Commerce have declined to comment on the rumors. The move signals a final push to centralize control over critical minerals used in electric vehicles and defense systems, further elevating rare earths as a lever in trade rivalries with the United States.
