China's first rare earth spot exchange will be established as early as August this year and will be led by Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co, the country's top rare earth producer.
Analysts said a nationwide exchange could help build a unified rare earth pricing mechanism in the country.
Rare earths are used in the manufacture of magnets that have a wide range of applications, from electric motors to disk drives, and demand for them is soaring worldwide.
"Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co will be one of two corporations designated by Baotou's municipal government to set up a rare-earth exchange in the city," said the company in a filing with the Shanghai Stock Exchange Wednesday.
No futures trading will be allowed on the exchange, according to the filing.
"Given the company's leading position in the light rare earth market, the new exchange, if echoed by the rest players in the industry, could help build up a unified pricing mechanism for light rare-earth," Zhang Anwen, deputy secretary general of China's Rare Earth Industry Association, told the Global Times.
The exchange's registered capital will be no less than 100 million yuan ($0.15 million), according to a report in Shanghai Securities News citing a source close to the matter.
A nationwide exchange would lead to a more transparent rare earth market, said Yuan Zhibin, an industry analyst with the CIC Industry Research Center.
"Recognition of the exchange could gain Baotou Steel, as well as the whole Chinese rare earth industry, a bigger voice in the international rare-earth market," said Yuan.
"Once mature trading norms and pricing mechanisms are established, prices of rare earth would return to a reasonable level," added Yuan.
Baotou's shares gained 0.93 percent to 70.62 yuan Thursday, a new record.
Baotou Steel Rare Earth is the country's largest rare earth producer. It has a total asset of 8.79 billion yuan by the end of 2010. In the first quarter of this year, it reported sales revenue of 2.11 billion yuan, up 116 percent year on year.