"It is the company's decision to halt production as the company has not exhausted its annual production quotas set by the government," Zhang Zhong, general manager of Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co told state-run news agency Xinhua.
Baotou's decision, he said, was aimed at propping up falling prices and stabilizing the market by limiting supplies of rare earths, a group of 17 elements crucial for green energy and high-tech components.
China has about one-third of global rare earth deposits but produces about 95 percent of the world's supply.
China's grip on the minerals market began more than 25 years ago when it flooded the market with cheap rare earths, forcing the closure of mines in other parts of the world. Now Baotou's move further tightens China's stronghold on the minerals, following a round of export quotas and price increases.
This year's price fluctuations for rare earths include: dysprosium, used in magnets, was selling for $2,840 a kilogram in July, after starting the year at $400 a kilogram; terbium, the green in TV screens, commanded $900 a kilogram in April, rising to $3,000 a kilogram in June and $4,510 in July, The Australian newspaper reports.
Lately prices of some rare earths are declining as economic activity slows and some end-users, most notably Japan, resort to recycling and finding substitutes for some of the minerals. Last year China briefly halted shipments to Japan following a diplomatic dispute.
Meanwhile, two major suppliers of rare earths are gearing up for production: Molycorp Inc.'s Mountain Pass in California and Lynas Corp.'s Mount Weld mine in Western Australia.
Those mines are expected to produce mostly light rare earths, thus ensuring global reliance on China for heavier rare earths and giving Beijing an incentive to keep prices high.
While figures from the Chinese Society of Rare Earths indicate that China's annual output of rare earths has surpassed an average of 100,000 tons since 2005, the central government's total export quota for this year is 30,194 tons, slightly lower than 30,258 tons for 2010.
Baotou's one-month suspension would remove about 5,000 metric tons of rare earth output from the global market this year, the Royal Bank of Scotland estimates.
"We would expect a monthlong shutdown from the largest producer in the world to impact prices reasonably quickly," RBS rare earth analyst Sam Berridge told The Wall Street Journal reports. "Rare earth production is quite consolidated and the market is quite small, so one of the majors could influence the supply-demand balance quite easily."