# China Rare Earth Group seeks control of Shenghe Resources *A potential buyout would give Beijing indirect exposure to the sole operating American rare earth mine alongside the Pentagon, MP Materials' largest shareholder.* **Published:** September 19, 2026 **By:** Mei-lin Guo **Section:** Energy & Critical Minerals — China **Format:** Breaking **Confidence:** high **Source:** https://eastasiabrief.com/energy-minerals/china-rare-earth-group-seeks-control-shenghe-resources-317 **Publisher:** East Asia Brief (https://eastasiabrief.com/) --- ## What to know - China Rare Earth Group seeks a controlling stake in Shenghe Resources, in talks underway since early 2026 - Shenghe holds a 3% stake in MP Materials, where the Pentagon holds roughly 15% via a $400 million investment - Shenghe convenes shareholders on Sept. 25, while formal acquisition terms remain unannounced ![Rare earth metal ingots, pellets, and powder samples sit on a table as laboratory technicians operate equipment in the background. (AI-generated image)](https://eastasiabrief.com/media/2026-09-18-0b127a4bed27.webp) *Rare earth metal ingots, pellets, and powder samples sit on a table as laboratory technicians operate equipment in the background. (AI-generated image)* State-owned China Rare Earth Group entered talks to acquire a controlling stake in processor Shenghe Resources, people familiar with the matter said Sept. 18, 2026. Shenghe holds an approximate 3% equity stake in MP Materials, which operates California's Mountain Pass mine, the sole active rare earth extraction facility in the United States. The transaction would position Beijing alongside the US Department of Defense on the same shareholder register. The Pentagon bought $400 million of preferred stock and warrants in MP Materials in 2025, securing roughly 15% equity. MP Materials shares fell 2.35% to close at $48.22 in New York trading following the report on Sept. 18. The drop left the American critical minerals producer with a market value of $8.6 billion. Talks between the two Chinese companies have been underway since early 2026, said the people, who requested anonymity because the discussions are commercial and confidential. A takeover would absorb one of China's final significant rare earth miners with mixed private ownership. Beijing has spent two decades consolidating regional mineral assets under centralized state enterprises to control extraction and refining quotas. China Rare Earth Group, Shenghe and China's Ministry of Commerce did not respond to requests for comment. The companies have not issued official public statements regarding the acquisition talks. Shenghe has not filed any acquisition disclosures with the Shanghai Stock Exchange, where its shares trade. Regulatory records show the processor's newest filings were a share repurchase update on Sept. 2 and shareholder meeting documents on Sept. 8. The two enterprises already maintain operational ties. China Rare Earth Group and Shenghe established an 800 million yuan ($113 million) joint venture named Zhongxi Weixiao in July 2026, partnering alongside private firm Jinan Weixiao. State-owned assets regulators formed China Rare Earth Group in December 2021 by merging three state producers: China Minmetals, Aluminum Corporation of China and China Southern Rare Earth Group. The conglomerate controls southern heavy rare earth resources. Shenghe has built the broadest overseas asset footprint among Chinese rare earth companies. In addition to its American holdings, the Chengdu-based processor completed the purchase of Australian miner Peak Rare Earths in 2025 to secure African deposits. Shenghe's acquisition of Peak Rare Earths gave the processor access to the Ngualla project in Tanzania. The deal was designed to secure high-grade bastnasite ore outside China, mirroring the company's earlier commercial arrangement with Mountain Pass. Mountain Pass extracts bastnasite rock rich in neodymium and praseodymium — light rare earth elements used to make permanent magnets for electric vehicles and defense hardware. MP Materials previously sent concentrate to Shenghe under a take-or-pay agreement. Cross-border shipments halted after Beijing increased import tariffs to 125% during retaliatory trade actions. MP Materials redirected its output, ramping up domestic refining facilities in California while seeking alternative customers outside China. MP Materials is constructing a magnet manufacturing plant in Fort Worth, Texas, to supply sintered neodymium-iron-boron magnets to General Motors. The Department of Defense has funded domestic processing lines to bypass Chinese supply chains entirely. US national security officials have monitored Chinese corporate holdings in domestic critical minerals. Any attempt by a Chinese state entity to take control of Shenghe would trigger intense scrutiny from the Committee on Foreign Investment in the United States. Washington could pressure MP Materials to force a divestment of Shenghe's 3% equity position. Federal procurement rules require defense contractors to eliminate Chinese ownership and processing inputs from critical military component supply chains. MP Materials has repeatedly stated that Shenghe exercises no operational control over Mountain Pass. The Las Vegas-based company produces refined rare earth compounds intended to supply magnet plants being built in Texas for American industrial buyers. For Western manufacturers, a finalized buyout would remove an independent counterparty from global rare earth procurement. Commercial access to Shenghe's processing lines would fall directly under Beijing's strategic quota management and export licensing controls. China controls roughly 70% of global rare earth extraction and over 90% of magnet-grade refining capacity. Bringing Shenghe into China Rare Earth Group would eliminate internal price competition between state champions and semi-private processors. Shenghe also processes ionic clay deposits in Jiangxi province that yield heavy rare earths, including dysprosium and terbium. Those elements allow permanent magnets to operate at elevated temperatures in fighter aircraft and missile guidance systems. The regulatory filings do not confirm the purchase price, proposed share percentage or whether Shenghe's overseas assets would remain intact under a state-owned parent company. Shenghe convenes an extraordinary general meeting of shareholders in Chengdu on Sept. 25, while China's Ministry of Industry and Information Technology prepares its next production quota release in October. ## Impact map | Event | Korea | China | Japan | Global impact | | --- | --- | --- | --- | --- | | Shenghe buyout talks | no direct asset exposure, domestic magnet users face tighter pricing control | China Rare Earth Group consolidates Sichuan and Jiangxi processing under state quota regime | magnet manufacturers lose non-state Chinese processing counterparty | Mountain Pass share registry links Chinese state firm with US Department of Defense | ## In this story - **Companies:** China Rare Earth Group, Shenghe Resources, MP Materials - **Tickers:** 600392.SS, MP - **Exposed:** Peak Rare Earths, General Motors - **Policy:** Economic Security, Export Controls, Subsidies - **Impact:** Supply Chain, Compliance, Pricing ## Primary sources 1. sse.com.cn 2. wsau.com 3. mining.com 4. rareearthexchanges.com 5. sina.com.cn --- Cite as: East Asia Brief, "China Rare Earth Group seeks control of Shenghe Resources," September 19, 2026. https://eastasiabrief.com/energy-minerals/china-rare-earth-group-seeks-control-shenghe-resources-317