Source: Reuters

China's Baotou Steel Rare-Earth Hi-Tech said it will suspend its smelting and separation operations for one month in an effort to stimulate the market. China, which produces 90 percent of the world's rare earth's, reduced its production and exports of rare earths, leaving the world scrambling to find a new source. Some nations and businesses, including Germany, have turned towards Mongolia as a new possibility.  Experts have predicted a future glut for certain light rare earth materials.

“In the circumstances of a continuing fall in prices, tepid demand and oversupply, Baotou will halt smelting and separation at its processing units from 19 October to further stabilize the market and balance supply and demand,” said the company in an official release. It added that the company plans to halt production on Rare earth ores to its own processing plants and other external plants.

Most of China's rare earth prices remained unchanged last week from two weeks ago, but a few in the complex fell. This signals that the industry is still in a correction cycle from extraordinarily high levels seen earlier this year after Beijing tightened controls over production and mining.

China began encouraging consolidation and cracking down on illegal private production in an effort to bring some stability to rare earth prices. Last month it decided to buy an unspecified amount of praseodymium-neodymium oxide at above market prices. It has also limited national production to 93,800 tons for 2011 and has vowed to crack down on producers that exceed their quotas.

With incentives high for private producers, China has traditionally struggled to impose its will on the sector. Total output exceeded the production quota by around 40,000 tons last year and traders also resorted to smuggling in order to get around a strict export cap.