The central government is planning a unified pricing mechanism for rare earth minerals in five provinces and regions, a move considered to prevent the valuable resource from being undervalued, industry sources said.

The plan, expected to be implemented as early as this month, covers Jiangxi, Fujian, Guangdong and Hunan provinces, as well as the Guangxi Zhuang autonomous region, which are rich in the resource.

Rare earth minerals are made up of 17 elements including terbium, thulium and yttrium. They are widely used in areas from wind turbines and hybrid cars to mobile phones and missiles.

China is considered to be the world's largest supplier of the resource.

In the latest move, reportedly backed by a top government agency, a unitary price based on negotiation will be published once a month to protect the natural resources from being depleted and to avoid cut-throat competition among the five affected areas, sources said.

The plan will still require support from local governments.

"In the long run, steps will be taken to heighten the influence of domestic miners on the price of the minerals in the global market," a source said.

"The pricing mechanism, if put into practice, will effectively buoy rare earths' undervalued prices and give Chinese producers more say on the global market," said Peng Bo, an analyst at Guosen Securities.

The Ministry of Land and Resources refused to comment on the latest development. The Ministry of Industry and Information Technology and the National Development and Reform Commission, the top economic planning agency, could not be immediately reached for comment.

The latest move is also considered significant as the rampant, illegal mining of rare earth minerals in the southern parts of China has led to market chaos from distribution to pricing and caused heavy environmental pollution.

"We fully support the mechanism as it will definitely increase market transparency and stabilize prices, which will stimulate our operations and sales," said an official of a major miner in the south who did not want to be named.

Some of the major rare earth oxides such as neodymium have rallied to 190,000 yuan ($28,000) a ton from the bottom low of up to 80,000 yuan a ton in 2008, driven by a crackdown on illegal mining as well as lower production and exports.

Chinese authorities launched a five-month nationwide crackdown on illegal mining of rare earth minerals starting in June.

Prior to that, the country also stopped issuing new licenses for domestic exploration of the minerals until June 30, 2011.

China supplies more than 95 percent of the global production of rare earth oxides. The country has 59.3 percent of the world's basic reserves of rare earth resources. Developed countries like the United States and Japan are almost entirely dependent on China's exports of the resource.

In contrast to the country's southern areas, the Baotou Steel Rare-Earth High-Tech Co in the Inner Mongolia autonomous region in the north has reportedly monopolized reserves of light rare earth elements and illegal mining activities over the resource have almost been cleaned up with unitary pricing.

The more scattered distribution of the minerals in the south makes unlawful mining in the region hard to control, which is the root cause of the low prices in rare earth minerals, industry analysts said.

"The five areas will also establish a unitary transportation and sales system for rare earth minerals," sources said. The five areas in the latest plan are expected to integrate mining resources and establish three to five conglomerates in the long run.

"Only the cross-province alliance will help curb illegal mining activities in the region," Peng said.

(China Daily July 8, 2010)