China locks down northern hub for coal and rare earths output

The lockdown of Baotou in the northern region of Inner Mongolia takes China’s Covid Zero policy deep into coal country and to a crucial hub for the production of rare earths.

Baotou, home to about 2.7 million people, announced late Monday that it will lock down for a week after it reported two cases of the virus. China Northern Rare Earth Group, one of the country’s six major miners of the minerals, is based in the city and operates the nearby Baiyun Obo mine, the world’s largest rare earth deposit.

China is by far the world’s biggest producer of rare earths, and its threat to use that dominance drew global attention three years ago during the trade war with the U.S. The set of elements defined as rare earths are commonplace in components used in everything from cars to home appliances and military hardware.

Calls to the company seeking comment on its operations weren’t answered.

Baotou is also the biggest city in China’s no. 2 coal producing region, some two hours drive from the mining hub of Ordos. Inner Mongolia accounted for about a quarter of national coal output last year, and as such maintaining its production would be critical to preventing a repeat of the power crisis that struck China in the fall.

The arrival of omicron on China’s shores has threatened to disrupt coal production by slowing mining activity and stalling transportation from mines to factories. In March, the queues waiting to pick up and deliver the fuel grew longer as truckers were forced to navigate lockdown requirements.

But the recent outbreak is unlikely to dent supply because of the strict measures already taken by miners to stop the virus spreading, said Yu Zhai, senior consultant at Wood Mackenzie Ltd.

Zhai cited preventative measures including drivers not being allowed to leave their trucks when they visit mines, and the fact that miners normally work and live in independent areas, which makes it easy for local government to isolate positive areas with little impact on other mines.

“Although the pandemic has worsened in China in March and April, no cases were reported at the mines, so it looks like the measures make sense,” he said.

Steelmaker Baogang Group is also based in the city and has 16.5 million tons of annual capacity, according to its website. China churns out about 1 billion tons of the alloy a year. Calls to the company seeking comment weren’t answered.