China's Attempt to Control Rare Earths Causes Prices to Drop 133%

China's attempts to cement government control over rare earthe exports seemed to backfire as industry have dumped inventory in the market, causing prices to crash from early highs of RMB 300,000 per ton in a matter of weeks.

The price tumbled to RMB 100,000 ($15,740) per ton in recent days in spite of a halt to production of China's two biggest domestic rare-earth producers, including Inner Mongolia Baotou Steel Group Rare Earth Hi-Tech.

Reports have circulated that China will begin to tighten its reins over the coveted rare earths industry by issuing special invoices to local producers and smelters that have passed environmental standards.

Beginning this month, only those rare earths producers and smelters with state-issued special invoices can manufacture, make inland transfers, and export.

According to the Ministry of Commerce, the new system, only qualified players will receive the special invoice, and provide it to downstream buyers.

Qualified miners and smelters will be checked for their technical and environmental track record, according to industry sources.

This in effect can provide the government the data if industry inventory is enough and purchases from illegal sellers can be tracked and penalized.

Lin Dongru, secretary general of the Chinese Rare Earth Society, said the introduction of the specialized invoices means that the government will be better able to manage the production and sale of rare-earth minerals.

According to a report from Business China quoting Heng Kun, chief analyst at Essence Securities, measures by major producers, such as a production halt or adding to reserves, are not effective in the face of market turmoil.

(To contact the reporter and editor for this story: c.jared@ibtimes.com.au)