Baotou Steel Gains by Limit as Chinese Rare Earth Supplier Says It Will Sell to Highest Bidder(Yicai Global) Nov. 10 -- Shares in Baotou Steel Union soared by the exchange-imposed limit today after the Chinese rare earth ore producer said that it will modify its pricing model to the more market-oriented mode of auctioning in a move that will likely force its biggest client Northern Rare Earth to accept its new pricing.
Baotou Steel’s share price [SHA:600010] closed up 10 percent at CNY2.12 (USD0.29). While Northern Rare Earth’s stock [SHA:600111] tumbled 4.3 percent to close at CNY26.80 (USD3.70).
Baotou Steel will sell its rare-earth concentrates through auctions and other public means, the Baotou, northern Inner Mongolia Autonomous Region-based firm said yesterday. If Northern Rare Earth, which is the country’s biggest producer of rare-earth products, cannot accept Baotou Steel’s latest offer price, the company can participate in the auctions, it added.
Each quarter, the two industry giants meet to determine the price for the next quarter. But at the last meeting in June, Northern Rare Earth refused to accept the price set by Baotou Steel, which has more than doubled the price of its rare earth ores since the beginning of the year. On Jan. 1 Baotou Steel raised its price by 65 percent to CNY26,887 (USD3,710) per ton and in June it increased the price by another 45 percent to CNY39,189 (USD5,408) per ton.
In late October, Baotou Steel said it has set its price at CNY37,230 per ton from July 1, in a slight concession to Northern Rare Earth’s objection. But according to yesterday’s announcement, it intends to sell to the highest bidder should its biggest client refuse to accept its latest offer again.
Both firms are owned by steel major Baotou Iron and Steel Group, which has exclusive mining rights to the world’s largest rare earth mine, the Baiyun Ebo mine in the deserts of Inner Mongolia.
Baotou Steel's tailings mine has rare earth reserves of 12.8 million tons of oxide, the second largest in the world, with an annual output of around 200,000 tons of rare earth concentrates, it said last July.
Editor: Kim Taylor
