China’s largest rare earths producer has said it has won official approval to set up the nation’s first exchange for the coveted minerals, in a move analysts said would further regulate the market.
The government of Inner Mongolia has approved the establishment of the exchange in the city of Baotou, Baotou Steel Rare Earth Hi-Tech Co (包鋼稀土高科技) said in a statement filed with the Shanghai bourse on Thursday.
The Inner Mongolia regional government has ordered the rare earths producer and Inner Mongolia Hi-Tech Holdings Co Ltd (內蒙古高新控) to set up a company “as soon as possible” to operate the exchange, according to the statement.
The exchange is not allowed to deal in futures trading, it said, meaning it would only be able to handle spot transactions of the minerals — 17 elements critical to making everything from iPods to electric cars and missiles.
Sang Yongliang (桑永亮), a Shanghai-based analyst with Guotai Junan Securities (國泰君安證券), said the Baotou bourse was “aimed at strengthening China’s rare earth pricing power.”
“It will also make market information more transparent. Currently, trades are quite dispersed and traders set prices with their downstream customers separately, which has made the market a bit chaotic,” Sang said.
China produces more than 95 percent of the world’s rare earths. State media has reported that Baotou holds 87 percent of the country’s reserves of the elements and accounts for about half of the nation’s rare earths exports.
Beijing has taken a series of measures to tighten its grip over the highly sought-after minerals, citing environmental concerns, leading to a surge in prices and triggering mounting complaints from foreign buyers.
The government has cut rare earths exports for the first half of this year by 35 percent compared with a year earlier, having slashed the quota by 72 percent for the second half of last year.
It has also set tougher environmental standards for the industry, restricted production capacity in projects that separate rare earths from crude ores and raised taxes.