China Minmetals Rare Earth (000831.SZ) announced on late Wednesday that it will cut output of rare earth smelting and separation products this year to prop up prices.
The cut will be more than 10 percent of the production quota assigned by the Ministry of Industry and Information Technology (MIIT) to the listed company. Earlier, in April, the MIIT unveiled the first batch of total rare earth production quotas for 2015.
China Minmetals Group, a big shareholder of the Shenzhen-listed company, got a production quota for rare earth smelting and separation products of 3,627 metric tons (tonnes) this year.
So far this week, China Northern Rare Earth (Group) High-tech Co., Ltd (600111.SH) and Xiamen Tungsten (600549.SH) also announced to cut their output of rare earth smelting and separation products by about 10 percent of the production quota assigned by the MITT.
The rare earth production quota assigned to China Northern Rare Earth was 25,960 tonnes this year. Xiamen Tungsten saw its production quotas for rare earth smelting and separation products stand at 1,379 tonnes this year.
Other large rare earth companies will likely follow suit to cut production in the future. Their cut in production will likely tighten market supplies, to some degree, to prop up rare earth prices in the short term as they take the lion's share in rare earth production quota assigned by the authorities, said analysts.
However, capacity of the domestic rare earth enterprises is much bigger than the production quota and the progress of industrial consolidation and de-capacity in the industry is slower than expected.
If authorities did not increase efforts to crack down on illegal production and announce policies to buy rare earths for state reserves, it would be hard for the rare earth prices to reverse the downtrend, said industry watchers.
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