ANP - SWOT

Where is the way for rare earth industry of China: An analysis via ANP-SWOT approach

Abstract

China monopolizes the rare earths resource, production, consumption, and export of rare earth products, while it has less opportunity to control the international market price. The issues of over-exploitation, excessive production and environmental pollution in China tend to be serious for a long time. In addition, poor scientific and technological innovation abilities limit the development of domestic rare earth industry. The Chinese government has implemented a series of export restriction policies to solve these problems. Due to the trade tension, the export restriction policies are abolished, and the China's rare earth firms will meet new problems. This study aims to provide an ANP-SWOT approach for interdependent analysis and prioritizing the rare earth industry in China. We analyze the internal and external environment factors, develop five short-term strategies and four long-term strategies to determine the optimal strategy of rare earth industry development plan. The results show that the best short-term development strategies for China's rare earth industry are the protection of key resources, mining right integration, and the best long-term strategies are establishing of national strategic reserve system of rare earth and improving the technical innovation capacity.

Keywords

• China's rare earth industry; 
• SWOT analysis; 
• AHP; 
• ANP; 
• Strategy management

1. Introduction

 Rare earth elements (REE) are the general name of 17 metal elements and their compounds, which are widely used in various areas of national economic development because of their unique physical and mechanical properties. REE are also essential strategic resources which play irreplaceable roles in energy conservation, environmental protection, aerospace, military, agriculture and pharmaceutical sectors (BGS, 2011; Webelements, 2011; McLellan et al., 2013). Despite their global distribution, REE are mined mainly in China. China produced 95,000 t REE in 2011. China's share of global production decreased from 95% in 2009 to 86% in 2012 (Tse, 2011). China has a near monopoly on the production of REE minerals, concentrates, and metals (Levkowitz and Beauchamp-Mustafaga, 2010). China's rare earth industry shift from exporting REE in their raw forms to the producing magnets. In 2010, China controlled 97% of rare earth ores, 97% of REOs, 89% of rare earth alloys, 75% of neodymium iron boron magnets industry and 60% of the samarium cobalt magnets industry (U.S.Government Account ability Office (GAO), 2010). And now, it produces finished products such as electric motors, batteries, and LCDs (Mancheri, 2012). With approximately 23% of the world’s total rare earth reserves, China has been satisfying more than 90% of the world’s demand for decades (MOC, 2014a). China has a near monopoly on the supply of REE minerals, concentrates, and metals (Hedrick, 1997; Levkowitz and Beauchamp-Mustafaga, 2010; Humphries, 2012). China became the world’s leading producer and exporter of REE in 2000 (Mancheri, 2015). Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co., is China’s single largest producer (Hurst, 2010). However, the supply power does not bring the corresponding pricing power. The reasons of the pricing power deficiency are lagging of high-end application development, disorder of export order, low industry concentration ratio and the short industry chain (Wang, 2011; Song et al., 2011; Yu and Yi, 2013; Tang, 2013). Moreover, the great mining value and the unsustainable policy orientation that China merely treated rare earth as a general resource and a tool to earn exchanges by the export tax rebate in early China (Wübbeke, 2013; Han et al., 2015). Although China's REE industry has become a government-sponsored project, the current situation of REE industry still has some severe problems: inefficient production (often with processing recovery rates below 10%) (State Council, 2012), low prices, fast depletion rates,horrendous pollution, over-exploitation and lax control (Wübbeke, 2013; Wang et al., 2015). Consequently, China executed some policies to solve these problems, including total control of mining quantities, industry reorganization, mandatory production plans, export quota, export tariff, resource taxes and so on (Schlinkert and van den Boogaart, 2015). The implementation of these policies, to a certain extent, alleviates the pressure on domestic resources and the environment.

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