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In the News

China plans index for rare earth metals

CHINA, the world's top rare earth producer, plans to establish a global authoritative pricing index for rare earth metals in an effort to enhance its pricing power over the resources, a leading domestic producer said yesterday.

The country's newly launched rare earth trading exchange will team up with futures and financial information institutions to compose the pricing index, Zhang Zhong, general manager of Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co, China's largest rare earth producer, said at a major annual industry conference.

Zhang did not reveal when trading on the index would begin as some preparatory work needs to be finished.

The company launched the trading platform in Baotou on Wednesday, along with nine other domestic rare earth firms and institutions, with a total investment of 100 million yuan (US$15.87 million).

The 10 companies and institutions produce about 88 percent of the country's annual rare earth output.

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Nation launches trading platform for rare earths in pricing move

CHINA yesterday launched a physical trading platform for rare earth metals as part of its efforts to regulate the sector and strengthen its pricing power for the resources.

The Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co, China's top rare earth producer, and nine other firms and institutions jointly launched the platform with a total investment of 100 million yuan (US$15.7 million). Each shareholder invested 10 million yuan and holds a 10 percent stake in the exchange.

The rare earth trading platform is located in Baotou City of north China's Inner Mongolia Autonomous Region, home to more than half of the world's light rare earth output.

Previously, China's rare earth market was largely opaque, as transactions were not made in public markets and always ran in small volumes. Only limited amounts of pricing and transaction data have been made available to the public.

The opaque market and the fact that Chinese rare earth producers far outnumber foreign consumers have weakened China in terms of price negotiations with foreign consumers, analysts said.

Ma Pengqi, a rare earth expert and former director of the Baotou Rare Earth Research Institute, said the trading platform will provide clarity and give China more say in deciding rare earth prices.

Some analysts, however, questioned the exchange's ability in stabilizing prices.

Liang Xingfang, general manager of Baotou Ruixin Rare-Earth Metal Material Co, said the spot market's role in stabilizing rare earth prices is limited. "We have to wait and see how the exchange will work in the future," he said.

As the world's largest producer of rare earth metals, China now supplies more than 90 percent of the global demand for the metals, although its reserves account for just 23 percent of the world's total.

Rare earth metals, a group of 17 metals, are vital for manufacturing high-tech products ranging from smartphones and wind turbines to electric car batteries and missiles.

Mining the metals greatly damages the environment. In recent years, China has come down heavily on illegal mining and smuggling, cut export quotas and imposed production caps and stricter emission standards to control environmental damage and stave off resource depletion.

However, these measures have irked rare earth importers, who complain about rising prices and strained supplies.

The United States, Europe and Japan in March filed a complaint to the World Trade Organization against China's export policies on rare earths and two other metals. The WTO formed a panel last month to investigate the complaints.

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Edward Lehman 雷曼法学博士
Managing Director 董事长

LEHMAN, LEE & XU China Lawyers
Co-Founder with Russell Brown LehmanBrown International Accountants

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China Mining Lawyers Alert or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com and Mongolia www.lehmanlaw.mn.

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