Neodymium is displayed at the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co factory in Baotou, Inner Mongolia. Neodymium and 16 other elements are known as rare-earth metals. [Photo/Agencies]

BEIJING - Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co Ltd, the world's largest rare-earth producer, will set up the Baotou Rare-Earth Products Exchange to further regulate the market.

It will be the country's first rare-earth product exchange and will trade only spot products, excluding futures, the company said in a statement on Wednesday.

It will take six months to complete the process of establishing the company, which will be registered on August 8, the statement said.

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Wang Caifeng, a former official at the Ministry of Industry and Information Technology (MIIT) who is setting up the country's Rare Earth Association, said the exchange will help increase the transparency and regularization of the rare-earth trading market.

She also said the Rare Earth Association, which will act like the China Iron and Steel Association, assisting companies in exports and international cooperation and leading price talks with foreign buyers, is still in the process of becoming established under the MIIT guidelines.

The Inner Mongolia autonomous region's Bayan Obo Mine in Baotou city - the source of 97 percent of the country's reserves - has unified the exploration of rare-earth minerals.

Baotou Steel Rare-Earth has said it wants to further consolidate companies from Fujian and Jiangxi provinces, which are rich in heavy rare-earth metals.

Rare-earth metals is the collective name for 17 elements that are used in the manufacture of such products as wind turbines, hybrid cars and missile guidance systems.

Extensive reserves of light rare-earth metal have been discovered in Inner Mongolia, and their production is dominated by Baotou Steel Rare-Earth. The more expensive heavy rare earths are scattered across a number of provinces and mined by larger producers as well as local small miners.

The State Council said on May 19 that it plans to consolidate the rare-earth sector by letting the biggest domestic players dominate the industry within two years, the first time that the Chinese government has publicly said it will let the biggest companies lead the industry.

The top three domestic conglomerates in the ion-absorbed-type rare-earth sector in the south of the country are set to hold more than 80 percent of the market share, said the State Council in a document