China Launches World’s Largest Rare Earth Production Base in Baotou

Massive Expansion of Rare Earth Production Capacity

Northern Rare Earth (NRE) has officially opened the world’s largest rare earth feedstock production facility in Baotou, Inner Mongolia. The upgraded Baotou Humei plant, a wholly-owned subsidiary of NRE, began operations on October 15, 2023. With an investment of 7.8 billion yuan ($1.1 billion), the facility significantly increases China’s rare earth extraction and processing capabilities. The plant will initially have an extraction capacity of 106,661 tons per year (t/yr) of rare earth oxide (REO), with a total output capacity projected to reach 234,000 t/yr by the end of 2023. This makes the Baotou facility a cornerstone of China’s dominance in the global rare earth supply chain.

Ongoing Growth and Global Market Implications

The Baotou plant is just the first phase of NRE’s broader expansion strategy. The company plans a second phase of construction, although details on capacity and timeline are not yet available. With the increasing global demand for rare earth materials, driven by industries like electric vehicles (EVs) and renewable energy technologies, this facility strengthens China’s position as the world’s leading supplier of critical rare earth elements.

Challenges in the Market and Financial Performance

Despite the impressive capacity boost, NRE is facing challenges in the rare earth market. The company recently auctioned 295 tons of praseodymium-neodymium metal but saw only limited demand, with 45 tons left unsold during auctions held in October. This slowdown in sales is reflective of softer market conditions, despite NRE raising the auction starting price for the metal to 530 yuan per kilogram. Financially, NRE reported a 21.2% decline in revenue for the first half of 2024, with a sharp 95.7% drop in net profit due to weaker demand and oversupply of rare earth feedstock.