State‑owned China Rare Earth Group is reportedly negotiating to buy Shenghe Resources, a move that would extend Beijing’s influence into a U.S. rare‑earth company. Sources familiar with the matter said the talks began earlier this year and that the Chinese firm seeks a controlling stake in Shenghe.

Potential impact on MP Materials

If the transaction closes, China Rare Earth Group would acquire Shenghe’s 3% ownership in MP Materials, the only U.S. producer of rare‑earth minerals that supplies the defense sector and other critical industries. MP Materials’ largest shareholder is the U.S. Department of Defense, which invested in the company last year.

MP Materials has repeatedly stated that neither Shenghe nor the Chinese government controls its day‑to‑day operations. The company’s leadership emphasized that the proposed ownership change would not affect its management or its commitments to U.S. customers.

Strategic significance

Rare‑earth elements are essential for electric vehicles, wind turbines, electronics and defense systems. By gaining a foothold in a U.S. rare‑earth producer, China Rare Earth Group would tighten its grip on the global supply chain for these critical materials. The group, created in 2021 after consolidating five state‑run rare‑earth enterprises, is already the world’s largest supplier of heavy rare‑earth elements.

Analysts note that the deal would give Beijing greater access to the quota system China uses to regulate rare‑earth output. Quotas for mining, smelting and separation are closely monitored as a barometer of global supply, but China has not publicly disclosed the exact numbers.

Recent activity and context

Last year, Shenghe acquired Australia’s Peak Rare Earths, expanding its international portfolio. The current talks represent a continuation of China’s decades‑long effort to consolidate the rare‑earth sector under state control, a strategy that has already shaped trade relations with the United States.

Both China Rare Earth Group and Shenghe declined to comment on the negotiations. The Chinese Ministry of Commerce also did not respond to requests for comment.

What remains unknown

The sources said they do not know when an announcement or completion of the acquisition might occur, nor how the deal would affect Shenghe’s overseas assets and stakes. Observers will watch closely for any regulatory review, given the involvement of a U.S. defense‑related shareholder.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.