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Suspension set to make rare earths even rarer

(China Daily)

09:41, October 19, 2011

BEIJING - China's biggest producer of rare earths is set to impose a temporary suspension of production at its processing plants.

Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co, the country's biggest producer of the valuable minerals by production, said on Tuesday that the move is aimed at warding off a plunge in prices and stabilizing the market.

The one-month production hiatus, which starts on Wednesday, has been implemented to comply with national guidelines intended to encourage a sustainable and healthy development of the industry against a backdrop of declining demand, the company said in a statement to the Shanghai Stock Exchange.

During the suspension period, the company will stop supplying raw materials to its smelting and separation plants and to partners of those companies, the statement said. The move comes on the heels of China Minmetals Corp's August call for an industry-wide suspension of production to guarantee stable operations in the sector after a sharp decline in prices since July.

"It's the right decision to absorb inventory overstock after a rapid decline in demand over recent months caused by skyrocketing prices, some having risen fourfold this year," said Liu Minda, an analyst at Huatai Securities Co Ltd. The surge in the price of raw materials, partly driven by market speculation, has eaten away at the profits of downstream producers in sectors such as automobiles and wind turbines, and has prevented the rare-earths industry from maintaining healthy and sustainable growth.

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