(Yicai Global) Dec. 13 -- Shares of Baotou Steel Union and Northern Rare Earth rose after the rare-earth ore supplier and the light rare-earth elements producer finally reached a compromise over the price of rare-earth concentrates after nearly half a year.

Baotou Steel [SHA: 600010] closed 3.6 percent up at CNY2.04 (29 US cents) a share today, while  Northern Rare Earth [SHA: 600111] jumped 4.9 percent to CNY27.29 (USD3.91).

The pair reached an agreement thanks to the mediation of their common controlling shareholder, Baotou Iron and Steel Group, they said in separate statements late yesterday.

Baotou Steel will sell the benchmark variety of rare-earth concentrates to Northern Rare Earth for CNY35,313 (USD5,060) a ton, with the buyer agreeing to purchase an additional 53,300 tons to be delivered before the end of this quarter, increasing this year’s transacted amount to 283,300 tons, versus the 230,000 agreed on previously.

The latest price represents a 24-percent increase from the benchmark price of CNY26,997 a ton in the first half of 2022. The two had failed to agree a price since June, with two offers by Baotou Steel for CNY39,189 and CNY37,230 a ton rejected at Northern Rare Earth’s shareholder meeting in June and October, respectively.

After negotiations failed, Baotou Steel threatened to end the prefixed pricing mechanism between the two in early November, and said it would change its pricing model to a more market-oriented auction mode if Northern Rare Earth did not accept its final offer in October.

At a meeting held each quarter, the two industry giants used to fix the supply price of rare-earth concentrates for the following quarter.

Baotou Steel's tailings mine has rare earth reserves of 12.8 million tons of oxide, the second largest in the world, with annual output of about 200,000 tons of rare earth concentrates, a senior executive at the company said in an investor meeting in July last year. Northern Rare Earth is China’s biggest maker of light rare-earth products.

Editor: Futura Costaglione