China rare-earth plant halts production to boost prices
China's biggest producer of the metallic elements used worldwide in batteries and magnets, halted output at some of its smelting units for one month as prices dropped.
The company with a long name, Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., stopped production at the plants to help stabilize prices amid a "relatively sluggish" rare-earth market, it said Tuesday in a statement to the Shanghai Stock Exchange. This is the second time Baotou has suspended part of its smelters, following a similar decision in last October.
Average prices of rare-earths minerals, a group of 17 chemically similar elements used in helicopter blades, wind turbines and hybrid cars, have fallen by almost 70 percent from 2011's record levels, according to Australian miner Lynas Corp. The suspension at Baotou's smelters last year had failed to shore up prices as consumers reduced purchases or sought alternative materials.
"The second attempt by Baotou would still have a limited impact on the prices," said Wei Chishan, a Shanghai-based analyst at SMM Information & Technology Co.
Neodymium oxide produced in Inner Mongolia has dropped 63 percent in the past 12 months to $60,010 a metric ton, according to data from Shanghai Steelhome Information. The prices dropped 15 percent in one month even after Baotou Steel Rare-Earth announced a halt Oct. 19, 2011.
Baotou closed down 3 percent Wednesday in Shanghai, compared with a 0.1 percent increase in the benchmark Shanghai Composite Index. The stock has surged 67 percent this year as the Chinese government cut mining permits to tighten rare-earth production, a move that benefited larger producers.
Illegal mining is also contributing to an overcapacity and falling prices in Chinese rare-earth markets, Jack Lifton, a senior fellow at the Institute for the Analysis of Global Security, said Tuesday in a telephone interview.
"When you have the largest company shut down, that means a lot of material in the market is illegal, and I've heard numbers as high as 40 percent," Lifton said. The Chinese government has ramped up its efforts to eliminate unauthorized mining, he said.
China, supplier of 90 percent of the world's rare earths, is looking to build stockpiles of the materials to help stabilize prices amid a challenge from the United States and other nations over its controls on exports of the elements.
The World Trade Organization agreed in July to probe China's export quotas and tariffs on rare earth minerals as well as tungsten and molybdenum after complaints by the United States, the European Union and Japan that the curbs break global commerce rules.