Baotou halting rare earth factory

Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Co Ltd, a leading rare-earth producer in China, announced Tuesday that one of its rare-earth ore concentrate factories would halt production for six months in a bid to stabilize the market.

Downstream branches of the company, such as rare-earth smelting factories, would use the company's rare-earth ore reserves that have accumulated over the past few years.

"Downstream production and the company's performance will not be affected," the company said in a statement posted on the Shanghai Stock Exchange Tuesday.

The company partially halted production three times in 2012 to stabilize prices during a sluggish market. Other major companies in the sector, such as China Minmetals Corp and Chinalco, also followed suit last year.

"Temporarily halting production may not be a bad thing, as the sector is suffering from severe overcapacity at present," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

The Ministry of Commerce on Monday released the second batch of rare-earth export quotas for the year, which totaled 15,500 tons. The first batch of rare-earth quotas added up to 15,501 tons, making the whole year's quota for 2013 roughly equal to the 2012 quota of 30,996 tons.

Lin noted that just like in 2012, rare-earth exporters are not likely to use up this year's quota given weak demand.

Rare-earth prices have fallen continuously for almost two years, as demand remains sluggish and cheap smuggled rare earths have also taken over a large share of the market.

Praseodymium-neodymium oxide, a barometer rare-earth product, is now sold at around 275,000 yuan ($44,852) per ton, compared with around 390,000 yuan per ton at the same time last year.

Over the past two weeks, there has been a slight rebound in rare-earth prices, which according to Du Shuaibing, an industry analyst with Beijing-based raw material information portal baiinfo.com, is because the government has recently cracked down on certain unlicensed rare-earth mines located in East China's Jiangxi Province.

Though Baotou Steel ­Rare-earth said its chief aim in halting production is to stabilize the market, experts said that the move would not serve as a significant boost to ­rare-earth prices as the company is still producing from stock and the industry is still suffering from overcapacity.

Experts also noted that ­rare-earth prices would not show a major increase in the latter part of this year. Baotou Steel Rare-earth has not yet posted its half-year report, but in the first quarter, the company's net profit dropped nearly 80 percent to 245 million yuan.

The company also said in the statement that its decision to halt production is a response to the government's call to balance demand and supply in the market. Recent media reports said that the Ministry of Industry and Information Te­­ch­nology is about to launch a new round of overhauls in the sector to crack down on unlicensed production.