Rare earth prices surge

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Prices of rare earth metals and shares of related Chinese companies have been on a bull run in China on the eve of the introduction of a key resources tax expected in April.

Since the beginning of this year, average prices of 17 elements that are vital ingredients in high-tech products have doubled in China from the end of 2010 as speculative funds are now suspected of targeting the industry for huge returns, analysts said.

Prices of two light rare earth elements, praseodymium oxide and neodymium oxide, soared about 120 percent from the end of last year to 459,000 yuan (about 70,000 U.S. dollars) per tonne and 575,000 yuan per tonne, respectively, last Friday, according to data of Hwabao Securities.

Prices of two other heavy rare earth materials, dysprosium oxide and terbium oxide, were 104 percent and 81.5 percent higher than at the end of last year.

"Speculators bought all rare materials available on the market, regardless of their prices," said an executive of a large rare earth company in the city of Ganzhou, east China's Jiangxi Province.

Ganzhou is one of China's largest rare earth producing regions, along with Baotou, a city in the northern Inner Mongolia Autonomous Region.

"The enormous funds began entering the industry shortly after the Chinese Lunar New Year, buying in large numbers in Ganzhou and Baotou," said the executive, who asked not to be named due to the sensitivity of the issue.

Rare earths, a collection of 17 elements, are important ingredients in manufacturing sophisticated products, including flat-screen monitors, electric car batteries, wind turbines, missiles and aerospace alloys. However, mining the metals is very damaging to the environment.

"Judging from years of experience since I've been in the rare earth industry, such buyers are not our real downstream clients, but speculators who are hoarding the materials for profiteering purpose," he said.

According to the executive, such speculative funds came mainly from Wenzhou and other cities in eastern Zhejiang Province.

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