China expands overseas mining push to tighten critical minerals control

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China expands critical minerals control

Highlights

Chinese mineral acquisitions abroad hit $8.8 billion in the first three quarters of 2023, surpassing any annual total since 2018 (Rhodium Group).
China now produces about 92% of the world's refined rare earths, giving Beijing significant pricing and supply leverage despite growing local processing requirements from host governments.
Chinese firms are pivoting toward greenfield investments and building processing plants near mine sites, especially in Indonesia after the nickel ore export ban, to adapt to stricter host country regulations.

State-backed mining strategy takes shape

As reported by CNBC, Beijing is building a more centralized system to direct overseas mining investment through state-linked companies and newly created institutions. In April, a dedicated overseas bureau was set up to oversee investments abroad by central state-owned enterprises, and in July a mining investment vehicle was created to coordinate deals and advise Chinese companies on compliance, risk management, and market conditions.

Analysts say the shift marks a move away from firm-level decision-making toward a state-coordinated global mining strategy. Dan Wang, China director at Eurasia, said the model could support larger and better-aligned investments abroad, while also reducing disorderly competition among Chinese companies and strengthening their position against Western rivals and newer entrants such as Saudi Arabia and India.

Chinese companies have been investing in overseas mining assets for two decades, often in jurisdictions avoided by Western miners, including Tajikistan and the Democratic Republic of Congo. The push is gaining momentum as critical minerals become more tightly linked to national security and geopolitical influence.

Chinese mineral acquisitions abroad reached $8.8 billion in the first three quarters of this year, already the highest annual total since at least 2018, according to a Rhodium Group report released Wednesday. Armand Meyer, senior research analyst at Rhodium, said acquisitions have largely focused on minerals China lacks at home, including lithium, nickel, and cobalt during the electric-vehicle boom and, more recently, gold.

Processing dominance adds geopolitical leverage

China's overseas investment drive is unfolding alongside efforts to preserve its advantage in mineral processing, an area where it holds a major global lead. Eurasia estimates outbound investment in upstream critical minerals will roughly double from the 2021-2025 period as Beijing seeks greater access to reserves of copper, lithium, cobalt, nickel, bauxite, and iron ore, all of which face supply pressure because of import dependence.

Dan Wang said Beijing treats 70% import dependence as an implicit red line, pushing the government to expand overseas supply even when investment risk or profitability may be weaker. She added that the pursuit of scale and geopolitical strength can outweigh purely commercial considerations.

That strategy is meeting growing resistance from host governments that want more processing to take place locally rather than in China. More resource-rich countries are restricting exports of unprocessed minerals and requiring foreign partners to refine materials domestically, challenging a model that helped China build major refining capacity despite the environmental costs of processing.

China now produces about 92% of the world's refined rare earths, according to the International Energy Agency. Brad Handler, director of Energy Finance Lab at the Payne Institute, said that if a rival builds new refining capacity, China can raise output, oversupply the market, and push prices below economic levels, giving Beijing the ability to influence prices and supply.

China has also curbed exports of seven medium and heavy rare earths since last year by requiring export licenses. Japan has been among the countries most affected, with shipments of yttrium oxide from China falling to 4,000 kilograms in September from 51,000 kilograms a year earlier, according to Chinese customs data, while prices outside China reportedly surged sharply.

At the same time, Chinese companies are adapting their overseas approach. Rhodium said firms are increasingly favoring greenfield investment and building processing capacity near mine sites instead of relying mainly on outright acquisitions, a trend that is especially visible in Indonesia after the country's ban on nickel ore exports pushed Chinese investors to develop local smelting and refining capacity.

Our earlier coverage examined China’s stance on rare earth exports to Europe, signaling it would keep approving export licenses even as timelines tied to a U.S.-China trade truce approached. The piece also outlined how EU-China talks focused on keeping critical-material supply flows stable, highlighting rare earths as a strategic bargaining chip in wider trade negotiations.

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