China seeks to boost market role in pricing of the strategic minerals
China’s first rare earths exchange started trading on Friday as the biggest producer of the elements seeks to increase the role of the free market amid criticism overseas for limiting exports.
Baotou Rare Earth Products Exchange in the Inner Mongolia autonomous region began trading europium oxide, praseodymium-neodymium oxide and cerium oxide, it said in a statement. The daily price movements of the contracts, denominated in yuan and for physical delivery, will be limited to a 6 percent range, except for the debut day, which allows for 15 percent, according to the exchange.
China is bringing exchange trading to rare earths as it consolidates miners and refiners of the group of 17 chemically similar elements used in products from smartphones to helicopter blades and hybrid-car batteries.
The trial comes after the World Trade Organization ruled against the country in the past week, agreeing with the US that limits on its exports violate trade rules.
“China wants to use its mineral resources in a sustainable way that maximizes the interests of all participants,” Peng Bo, an analyst at Huachuang Securities Brokerage Co, said by phone from Shenzhen on Friday. “A vibrant trading platform that helps regulate supply and demand can also deflect foreign criticism of the government’s heavy hand in the industry.”
China accounts for 90 percent of the world’s production of rare earths. A cut mining permits and imposed production and export quotas in 2007 to reduce pollution and conserve supplies. The export controls have soured relations with the world’s major users, including the US and Japan, and spurred investments in Australia, Malaysia and the US.
The opening-reference price of europium oxide was set at 4,000 yuan ($644) a kilogram, praseodymium-neodymium oxide was 320 yuan and cerium oxide 19.5 yuan, according to the Baotou bourse.
Lockheed Martin Corp’s F-35 fighter jet is among weapons that contain neodymium iron-boron magnets made using rare earth material from China, a US Defense Department study in 2011 showed.
China typically releases two export quota batches every year and, from time to time, makes purchases for government stockpiles when prices drop, Peng said.
A dispute-settlement panel at the Geneva-based WTO on Wednesday determined that China didn’t adequately justify imposing export duties and quotas.
The Association of China Rare Earth Industry will study details of the WTO report and evaluate its impact, Chen Zhanheng, a deputy general secretary at the association, said in a text message.
China is trying to promote six companies including Baogang Group and Aluminum Corp of China to lead acquisitions in the rare earth sector, Peng said.
The State Council in January also said it approved in principle Ganzhou city in the eastern province of Jiangxi setting up the largest rare earth group in southern China, under the Ganzhou Rare Earth Group, according to a National Business Daily report.