SHANGHAI China will launch its first spot trading platform for rare earths on August 8, state media reported, in the country's latest effort to improve price discovery and regulate the market better.
The platform, led by China's largest producer Baotou Steel Rare-Earth Hi Tech, will only allow physical trading, the Shanghai Securities News said, without citing sources.
China accounts for more than 95 percent of the global output of rare earths, a group of 17 minerals used in the electronics, defense and renewable energy industries.
But Beijing has cracked down on illegal mining, imposed strict production caps and set export quotas, saying that excessive production over the last decade has severely depleted its reserves, damaged its environment and dragged prices down to artificially low levels.
Despite a 30,184 metric tons (33, 272 tons) export quota in 2011, China says it shipped only 18,600 tonnes last year. The squeeze on supply has led, in part, to a fourfold increase in export prices over the past two years.
The government has said the quota will remain steady in 2012.
As a result of the curbs, the European Union has said foreign firms pay up to twice as much as Chinese firms for rare earth metals.
China recently set up a rare earth industry association and is also launching a national strategic rare earth reserve to give it more say over the way the materials are priced.
In March, the European Union, United States and Japan complained to the World Trade Organization that Beijing illegally choked exports while holding down prices for domestic manufacturers.
China has denied the charges, saying product quality variations account for the price gap between the metals it produces for export and domestic use.
In a similar case on raw materials in January the WTO ruled against China, saying that environmental protection was only a valid reason to curtail exports if China was giving the domestic and international markets equal treatment.
(Reporting by Ruby Lian and David Stanway;Editing by Clarence Fernandez)