China Eyes Rare-Earth Trading Platform August 8

--China to launch a physical trading platform for rare earths Aug. 8

--Plan will extend efforts to assert more strategic pricing control

--Baotou, top 10 Chinese producers to set up platform in Inner Mongolia

BEIJING--Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. (600111.SH), China's largest rare-earth producer by output, plans to launch a rare-earth trading platform on Aug. 8 this year, the company said in an in-house news report.

The physical trading bourse will extend China's efforts to exert more control over the pricing of major industrial commodities, including these 17 strategically important metals that are used in global high-technology applications such as defense systems and telecommunications.

Baotou is leading about 10 major Chinese rare-earth producers to set up the platform, it said in the report, details of which were also published in the state-run Shanghai Securities News Thursday.

The exchange will be located in Baotou city in China's northern region of Inner Mongolia, home to nearly half the world's light rare-earth output.

China controls about 95% of the world's rare-earth production, and its attempts to restrict exports have become the basis of a trade complaint by the U.S., Europe and Japan at the World Trade Organization.

Last month, the U.S. Trade Representative's Office said the Obama administration remains "deeply troubled" over China's restrictions on the exports of rare earths and is deciding on its next course of action after concluding consultations with Beijing through the World Trade Organization.

China launched a physical trading platform for iron ore in May, although the exchange's data show it has been thinly used so far.

The Aug. 8 launch date for rare earths was likely chosen to coincide with a major annual industry conference, the Baotou China Rare-Earth Industry International Forum, to be held in Baotou city Aug. 7-11.

Baotou officials didn't respond to a call for comment.

Even as it contends with a brewing trade dispute, China has struggled with plummeting rare-earth prices in the last year. Bellwether rare-earth oxides such as neodymium oxide have nearly halved in price amid weakening global demand from an average of $132.06 a metric ton last year, data from Australian rare-earth miner Lynas Corp. [LYC.AU] showed.

China tries to influence prices through export quotas. It has issued 21,226 tons worth of quotas so far this year, but the Ministry of Commerce has said it plans to maintain the full-year quota roughly on par with last year's 30,184 tons.

However, Chinese exporters used up only 62% of last year's quota due to weaker demand.

Early indications from industry websites show only about a quarter of this year's initial quota has been used.

Write to Chuin-Wei Yap at [e-mail]