China rare earths giant halts output as prices fall

China state-linked Baotou, the world's largest rare earth producer, said it has halted output for a month from Wednesday as the country seeks to boost prices of the sought-after commodities.

China produces more than 95 percent of the world's rare earths -- 17 elements critical to manufacturing everything from iPods to low-emission cars -- and its moves to dictate production and exports have caused an outcry from major trading partners.

An official at Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-tech Co. Ltd (Baotou) called the production stoppage temporary. Baotou operates the world's largest production base for rare earths, according to its website.

"Production should resume in a month as it is just a provisional measure," the official, who declined to be named, told AFP. He added the company called a similar month-long halt in May 2008.

In a statement earlier this week, the Shanghai-listed company said it would halt supplies of raw materials to its processing units for a month to "stabilise the market and balance supply and demand".

The move marks the second time in as many months that Baotou has sought to boost rare earth prices.

Last month, it bought praseodymium-neodymium oxide -- one of its own rare earths products -- from other companies at above market prices to "protect resources and maintain market stability", the company said.

Average prices for rare earth oxides have fallen more than 20 percent in the past three months, the China Daily newspaper said Wednesday.

Speculation sent prices soaring in the first half of the year but the market has since retreated, with analysts blaming excess inventory caused by slowing demand amid the global economic turmoil.

Beijing has angered trade partners by restricting overseas shipments of rare earths, in a bid to burnish its green credentials and tighten its grip over the metals.

In May, the State Council, or cabinet, said it would prohibit any increase in production capacity for existing projects to separate rare earths from crude ores and stop review of applications to explore for new mines.

It also urged large state firms to accelerate industry consolidation and severely punish unapproved exports of rare earths.

Investors reacted negatively to the latest news on Wednesday, sending Baotou's stock price down 3.98 percent to 45.61 yuan ($7.2) in morning trade, even as the overall market rose.


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