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China launches rare earth trading platform

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BAOTOU, Aug. 8 (Xinhua) -- China on Wednesday 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, launched the platform together with nine other firms and institutions with a total investment of 100 million yuan (15.77 million U.S. dollars). Each shareholder invested 10 million yuan and holds a 10-percent stake in the exchange.

The rare earth trading platform is located in the city of Baotou in 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 the number of Chinese rare earth producers far outnumbers that of foreign consumers have weakened China in terms of price negotiation with foreign consumers, industry 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 effect on 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 rare earth 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 the manufacture of high-tech products ranging from smart phones and wind turbines to electric car batteries and missiles.

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