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Posco acquires Chinese rare earth firm

By Hu Yang (chinadaily.com.cn)
Updated: 2010-06-11 16:20

South Korean steelmaker Posco, together with Korea Resources Corp, acquired a controlling stake in a Chinese rare earth mining company.

Analysts say this might be a strategy to bypass China's restriction on rare earth exports, National Business Daily reported on Friday.

Posco and Korea Resources bought 60 percent of Yongxin Rare Earth Metal Co, a company in Inner Mongolia autonomous region, for 59.76 million yuan ($8.8 million). The purchase was made by Posco-China, Posca's investment arm in China.

The deal enables Posco to buy rare earth export quotas from other companies and export rare earth back to South Korea, said Geng Nuo, an analyst with Great Wall Securities. Only about one-fifth of rare earth mining companies in China have export quotas.

Rare earth contains elements which are indispensible in many high-tech arenas such as wind turbines and hybrid cars. China supplies 93 percent of the global production of rare earth elements.

South Korea has been encouraging its wind power industry, which needs elements contained in rare earth.

Recently China has tightened controls on the rare earth industry. Feeling the pressure of decreased supplies, many foreign companies came up with contrivances to get around export restrictions. Besides buying quotas, some companies set up processing plants in China, on which export restrictions are comparatively looser, and export processed rare earth products from them,.