China Mining Weekly: Strategic Mineral Controls Escalate, Lithium Capacity Release and Geopolitical Risks Coexist

Bottom Line

This week, China's implementing regulations for the Mineral Resources Law officially took effect, strictly controlling the entire chain of 36 strategic minerals, which is a long-term positive for leading enterprises with resource advantages. Meanwhile, domestic lithium mine capacity has been formally released (Dazhong Mining's 40,000 tons/year lithium production line ignited), but overseas policy risks (Malaysia's crackdown on illegal mining, Zimbabwe's export ban delay) and the G7's decoupling from China facing obstacles together form a long-short game pattern. It is recommended that investors overweight leading companies with strategic mineral reserves and strong compliance, and underweight pure export-oriented targets with large overseas exposure.

Key Developments

1. Implementing Regulations of the Mineral Resources Law Take Effect, Strict Control Over 36 Strategic Minerals Across the Entire Chain — On June 15, 2026, China officially implemented these regulations, classifying rare earths, tungsten, lithium, cobalt, gallium, and germanium as strategic minerals, with strict controls over the entire process of mining, processing, and export. Portfolio implication: Positive for state-owned enterprises and large private companies (such as Chinalco Group and Northern Rare Earth-related targets) that hold mining rights for the above minerals and have strong compliance capabilities. However, it may suppress export expectations for small and medium-sized mining enterprises in the short term, and attention should be paid to marginal changes in enforcement intensity.

2. Dazhong Mining Lithium Production Line Ignites, Hunan Lithium Mine Capacity Released — On June 18, 2026, Dazhong Mining held an ignition ceremony for its 40,000 tons/year lithium carbonate production line at the Jijiaoshan lithium mine in Linwu, Hunan, marking the official entry of this lithium resource project into the capacity release stage. Portfolio implication: The accelerated increase in domestic lithium carbonate supply may ease short-term supply-demand tensions, but if prices come under pressure, it will compress profits for high-cost miners. Monitor whether companies like Tianqi Lithium and Salt Lake Industry, which have already benefited from price rebounds, face competitive pressure.

3. Malaysia Cracks Down on Illegal Mining, Several Chinese Citizens Arrested — Malaysia has recently intensified efforts to combat illegal mining and cross-border mineral product smuggling, imposing a comprehensive ban on raw mineral exports, with several Chinese citizens arrested. Portfolio implication: This poses direct operational risks for Chinese enterprises (such as some private mining companies) with mining or trading operations in Malaysia, requiring assessment of compliance costs and potential supply chain disruptions. At the same time, the ban may increase the value of processing links within the region.

4. G7 Decoupling from China Faces Significant Difficulties, Supply Chain Restructuring Hard to Achieve in Short Term — Bloomberg and multiple media outlets have disclosed that the G7 plans to reduce its dependence on China for rare earths and permanent magnets to below 60% by 2030, but faces bottlenecks in subsidies, investment, and diplomatic coordination, making breakthroughs difficult in the short term. Portfolio implication: China's dominant position in the global rare earth and critical mineral supply chain will not change in the short term, and the export pricing power of leading related companies (such as Northern Rare Earth and Xiamen Tungsten) will persist. However, vigilance is needed regarding volatility from long-term policy games.

5. Zimbabwe Lithium Export Ban Delay Application, Only Huayou Cobalt Has Built Processing Capacity — The Zimbabwe Lithium Producers Association has applied to postpone the lithium concentrate export ban, originally set to take effect on January 1, 2027, to March or June, citing that most companies have not yet built sulfate processing capacity, with only Huayou Cobalt meeting the conditions. Portfolio implication: Huayou Cobalt's layout in Zimbabwe gains a first-mover advantage, but the ban delay provides a buffer for other companies. Monitor whether there are subsequent changes in effectiveness. For Chinese lithium salt plants dependent on Zimbabwean raw ore, short-term supply risks are alleviated.

Sector Pulse

Risk Watch

• Risk of Escalated Enforcement in Malaysia — If Malaysia expands its crackdown to include legitimate Chinese enterprises, it could lead to project suspensions and personnel repatriation, affecting Chinese mining investments in Southeast Asia. Trigger condition: Malaysian government intensifies reviews or introduces new regulations. Probability: Medium. Impact: Medium.
• Risk of a Second Bottom in Lithium Prices — The concentrated release of domestic lithium capacity (Dazhong Mining, Jianxiawo, etc.) combined with slowing demand growth may lead to a decline in lithium carbonate prices. Trigger condition: Downstream production schedules fall short of expectations after June. Probability: Medium. Impact: High.
• Risk of Sudden Policy Changes in Overseas Resource Countries — Countries such as Zimbabwe, Malaysia, and Indonesia frequently adjust their mineral resource export policies, which may impact the valuation and cash flow of Chinese companies' overseas assets. Trigger condition: New legislation or presidential decrees. Probability: Low. Impact: High.

Outlook

Key Events and Indicators to Watch:

• Subsequent implementation documents from China's Ministry of Natural Resources regarding export quotas and approval details for the 36 strategic minerals.
• Changes in spot lithium carbonate prices (especially Shanghai Metals Market quotes) from late June to July.
• Whether the Malaysian government announces specific results of mining license reviews and updates on the handling of Chinese citizens.

Position Suggestions: In an environment of tightening policies and overseas risks, it is recommended to overweight domestic strategic mineral leaders (such as companies with high self-sufficiency rates in rare earths, tungsten, and lithium resources), underweight pure overseas mining rights companies, and use options to hedge against downside risks in lithium prices.