In a bid to further curb the rampant illegal production of rare earths, China is all set to introduce specialised invoices for designated rare earths producers this month. Though rumours to that effect have been surfacing all through last month, traders say a decision in this regard has been taken to cushion the fall in rare earth prices and to curb over production.

Traders in China have been caught off guard by a sudden dip in rare earth prices, with the prices of certain minerals plunging over 30% as compared to last month. This has led to many dealers who had accumulated inventories at high prices being thrown off balance. Moreover, prices of rare earths sold without invoices have fallen even further,'' said an analyst tracking the sector.

Eoin Treacy's view Rare earth metal prices have fallen sharply over the last few months as supply overtook demand primarily due to overproduction in China. It remains to be seen to what extent a quota system can be enforced but since the sector is of strategic interest to China, we can probably give the authorities the benefit of the doubt.

Rare earth metal shares have also underperformed of late, not least because of deteriorating metal prices and widespread deleveraging. Most have fallen significantly and while there is still little evidence that most shares have formed a medium-term low, the successful implementation of a quota system could be a bullish catalyst. This Chart Library Performance Filter contains a number of rare earth metal companies.