Reuters reported that China's Baotou Steel Rare Earth Hi Tech will suspend its smelting and separation operations for one month from Wednesday, in an effort to stimulate the market.

Baotou Rare Earth, China's top rare earths producer said in a filing to the Shanghai Stock Exchange that the move was aimed at supporting Beijing's efforts to preserve rare earth resources and end a sustained decline in prices.

In the circumstances of a continuing fall in prices, tepid demand and oversupply, Baotou will halt smelting and separation at its processing units from October 19th 2011 to further stabilize the market and balance supply and demand.

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

The company will stop supplying rare earth ores to its own processing plants and other external plants. It is not the company's first attempt to stem the decline in rare earth prices. Last month, it decided to buy an unspecified volume of praseodymium neodymium oxide at above market prices.

China has resolved to streamline the chaotic rare earth sector by encouraging consolidation and cracking down on illegal private production, cited as the key reason for the decline in prices over the past few months. It has imposed a national output cap of 93,800 tonnes for 2011 and has vowed to crack down on producers that exceed their quotas.

It launched 4 month inspection campaign at the beginning of August to ensure that production quotas, pollution standards and consolidation targets were being met.

The industry ministry said that it planned to strengthen monitoring and inspections" in the coming months, saying that it would pay particular attention to punishing traders and processors that receive illegally mined rare earth products.

The region of Inner Mongolia in China's northeast, the source of most of the country's light rare earths has forced a number of small firms to merge with Baotou Rare Earth and has also been cutting off electricity supplies to private producers to force them to shut down.

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 tonnes last year and traders also resorted to smuggling in order to get round a strict export cap.

(Sourced from Reuters)