First rare- earth prod­ucts ex­change to help sta­bi­lize mar­ket

China Daily (Hong Kong) - - BUSINESS - By DU JUAN in Bao­tou, In­ner Mon­go­lia du­juan@chi­nadaily.com.cn

China’s first rare-earth prod­ucts ex­change is sched­uled to launch in early Oc­to­ber af­ter a year’s prepa­ra­tion. It will help fur­ther reg­u­late the mar­ket and de­liver pric­ing power, said a se­nior of­fi­cial on Fri­day.

China is the largest rare-earth pro­ducer and ex­porter, ac­count­ing for more than 90 per­cent of the world’s sup­ply. How­ever, the wild price swings of the re­sources have had a neg­a­tive ef­fect on Chi­nese pro­duc­ers.

“The ex­change will help the Chi­nese rare-earth in­dus­try to have a big­ger say on prices in the global mar­ket,” said Gu Ming, gen­eral man­ager of the Bao­tou Rare Earth Prod­ucts Ex­change, dur­ing the Fifth China Bao­tou Rare Earth In­dus­try Fo­rum held in Bao­tou, the In­ner Mon­go­lia au­ton­o­mous re­gion.

It will act as a pric­ing, ser­vice and fi­nanc­ing cen­ter for China’s rare- earth in­dus­try, said Gu.

“The ex­change will bring the dif­fer­ent pro­duc­tion re­gions closer, raise the trans­parency of trad­ing prices, ad­just longterm sup­ply and de­mand and sta­bi­lize the mar­ket,” he added. “The trad­ing plat­form can also pro­vide im­por­tant in­for­ma­tion for the govern­ment when it makes pol­icy.”

In May 2011, the State Coun­cil an­nounced guid­ance for the rare- earth in­dus­try, mak­ing it a national con­cern.

The guid­ance re­quired dif­fer­ent au­thor­i­ties and lo­cal gov­ern­ments to reg­u­late the ex­plo­ration, pro­duc­tion and trad­ing of the re­source and make ef­forts to crack down on il­le­gal min­ing and smug­gling.

On Wed­nes­day, the cen­tral govern­ment launched a three­month cam­paign to crack down on il­le­gal ac­tiv­i­ties in the rare-earth sec­tor again.

Zhou Yong, gen­eral man­ager of a rare-earth trad­ing com­pany in Guang­dong prov­ince, said the com­pany didn’t make money for the first half of the year be­cause of the high level of smug­gling.

“Weak de­mand and low prices were two rea­sons be­hind the com­pany’s loss, but the big­gest rea­son is smug­gling. Com­pared with them (smug­glers), we don’t have any price ad­van­tage with our ex­ports.”

Zhou hopes the ex­change can re­ally help the in­dus­try and pro­mote fair trad­ing, but added it has a long way to go.

The ex­change was ini­ti­ated by In­ner Mon­go­lia Bao­tou Steel Rare-Earth Hi-Tech Co Ltd, the world’s largest rare-earth pro­ducer.

The com­pany re­ceived ap­proval from the lo­cal govern­ment of In­ner Mon­go­lia au­ton­o­mous re­gion in May 2011 and reg­is­tered the ex­change with an­other 11 ma­jor rare-earth com­pa­nies. The to­tal regis­tra­tion cap­i­tal stood at 120 mil­lion yuan ($19.5 mil­lion) in Au­gust 2012.

Zhang Zhong, gen­eral man­ager of In­ner Mon­go­lia Bao­tou Steel Rare-Earth Hi-Tech Co, said the trad­ing plat­form will form a mar­ket-ori­ented price in­dex in the long run, which is ben­e­fi­cial for the sus­tain­able de­vel­op­ment of the global ra­reearth in­dus­try. “We hope the ex­change can carry out fu­tures trad­ing in the fu­ture,” Zhang said dur­ing the fo­rum.

Ac­cord­ing to Gu, the ex­change will at first pro­vide spot and for­ward trad­ing for com­pa­nies, ex­clud­ing fu­tures. All rare-earth prod­ucts through­out the pro­duc­tion chain can be traded on the plat­form.

How­ever, he said Bao­tou Steel Rare-Earth will not put all its prod­ucts on the plat­form at the be­gin­ning be­cause it takes time for new ex­changes to grow. He de­nied the ex­change will at­tract hot money, say­ing there will be de­tailed rules to pre­vent that from hap­pen­ing.

He said the on­line trad­ing plat­form will hold a test run in Septem­ber.

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