Bloomberg News

Baotou Rare-Earth Surges After Profit Quadruples: Shanghai Mover

March 27, 2012

Inner Mongolia Baotou Steel Rare- Earth Hi-Tech Co. (600111) rose the most in more than a week after China’s biggest rare earths producer said 2011 profit quadrupled from a year earlier.

The shares gained as much as 8.4 percent to 71 yuan in Shanghai and were at 70.48 yuan as of the 11:30 a.m. trading break. The increase in Baotou’s shares was the third-biggest of any stock on China’s benchmark Shanghai Composite Index (SHCOMP), which gained 0.2 percent.

Chinese limits on the output and sale of rare earths have pushed up prices for the 17 chemically similar metallic elements used in products including Boeing Co. (BA:US) helicopter blades and Toyota Motor Corp. hybrid cars. Baotou yesterday said 2011 profit surged fourfold to 3.5 billion yuan ($555 million). Its shares have gained 87 percent this year, the most of any stock in Shanghai, on reports control of the industry may increase.

“The surge in profit has helped market sentiment,” said Wang Qianming, a Shanghai-based analyst with Everbright Securities Co. who rates Baotou’s shares “accumulate.” “Shares have climbed on expectation the government’s push to boost consolidation will benefit the company and other key players in China.”

The nation’s state broadcaster, China Central Television, reported last week that authorities may increase punishments for over production of rare earths. China will also push the formation of large rare-earth enterprises and also announce requirements for entering the industry, CCTV reported March 20, citing the Ministry of Industry and Information Technology.

China’s limits on rare earths also prompted the U.S., the European Union and Japan to file complaints at the World Trade Organization this month. They say the restrictions give Chinese manufactures an unfair advantage.

The Chinese government says the limits were imposed to protect China’s resources and environment.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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