Rare earth giant suspends production

26 October 2012

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28 October 2012 | Adam Leach

Baotou Steel Rare Earth is suspending a portion of its production for a month in a bid to stem falling prices for the previously highly prized materials, the company has announced.

In a statement released to the Shanghai Stock Exchange, where the company is listed, Baotou, the largest producer of Rare Earth Elements (REEs) in China, said it was taking the action to try to push prices up again.

The statement said: “Demand for rare earths has weakened in the second half on the back of the economic slowdown, causing a sustained fall in prices. To stabilise the market and balance supply and demand, Baotou will halt its smelting and separation of some units from 23 October.”

Last week the company reported that third quarter profits had dropped by 89.6 per cent year-on-year. An over supply of REEs has seen prices drop across the board, so by stopping production, the company hopes to close the supply/demand margin and boost prices.

In August, a paper by the Institute of Defence Studies and Analyses argued that the Chinese government is trying to increasingly control the REE market. In the report, Nabeel Mancheri, a post doctorate research fellow at the National Institute of Advanced Studies in Bangalore, said: “China has started to regulate the rare earth industry intensively since 2010. Its policy measures have heightened the consolidation process of the industry and the country has started to build strategic reserve of the minerals. These policies will provide China more power to fix the prices and control the supply in the international market.”

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