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China’s rare earth producers halt output on falling prices

Keywords: Tags  Inner Mongolia, Baotou Steel Rare-Earth, rare earths, Chalco, Minmetals, yttrium, neodymium, terbium Mark Burton

LONDON — China’s largest rare earth producers have shut down operations in response to a sharp fall in prices in recent weeks.

After Baotou City-based Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. Ltd. announced in late October that it would shut down operations for a month, other major producers—including subsidiaries of Beijing-based Aluminum Corp. of China Ltd. (Chalco) and China Minmetals Corp.—have followed suit by vowing to halt production until prices rebound.

Rare earth oxide prices have fallen sharply in the fourth quarter, compounding losses seen throughout the year as stockists looked to sell into a weak consumer market.

Baotou, the world’s largest rare earths producer, reported a 90-percent plunge in third-quarter profits, citing a steep drop in rare earth prices. Shanghai Futures Exchange-listed shares in the company dropped as much as 15 percent following its earnings report, but they recovered almost fully after the company announced its production cuts.

The latest action by Chinese producers has not affected international spot prices, and prices in the near term may remain under pressure as traders rush to put cash on their books before the end of the year.

In the past, supply shocks caused by export quotas, embargoes and a crackdown on illegal mining created sharp spikes in rare earth prices. But the volume of stocks held outside the country will satisfy consumer demand for some time, sources said, mitigating the near-term effect that the latest announcement will have on spot prices.

"There are a lot of market participants who need to cash in their positions, and they are all trying to outbid each other," a rare earths trader in Europe told AMM sister publication Metal Bulletin. "Then, on the other side, you still have a difficult economic situation (in which) consumers are buying hand-to-mouth and only restocking when it’s absolutely necessary."

Prices for yttrium oxide have fallen particularly sharply in recent weeks, with the market currently trading at $50 to $60 per kilogram ($22.68 to $27.22 per pound), down 20 percent from two weeks ago, the trader said.

Toronto-based Dacha Strategic Metals Inc., which maintains an office in Beijing and offers investors price exposure to a physical stockpile of rare earths, saw the value of its entire inventory at the end of October was down more than 25 percent from the end of August. The value of its yttrium oxide inventory slid 15 percent to $98 per kg ($44.45 per pound), its dysprosium oxide value tumbled 25.6 percent to $740 per kg ($335.66 per pound) and its terbium oxide value fell 24.7 percent to $1,355 per kg ($614.62 per pound). 

A version of this article was first published by AMM sister publication Metal Bulletin.

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