In the first quarter, Baotou Steel Rare-Earth (Group) Hi-Tech, the country's largest rare earth producer, reported revenue of 2.29 billion yuan ($366 million), down 35.7 percent from a year ago. Its net profit fell 79.7 percent to 245 million yuan. Its first quarter report said prices for its main products have dropped more than 50 percent.

Last year, the firm saw a sharp drop in net profit and revenue due to falling demand and a slowing economy.

Net profit dropped 56 percent to 1.51 billion yuan year-on-year, while revenue fell 19 percent to 9.24 billion yuan as a result of low demand in the rare earth market and a price drop.

Baotou Steel resumed production on Feb 23 after a four-month halt due to the price slump. Another producer, Rising Nonferrous Metals Co Ltd, saw a first quarter loss of 29 million yuan due to a drop in operating revenue and gross profit.

Last month, China Minmetals Rare Earth Co Ltd announced a 47 percent drop in revenue, from 7.6 billion yuan in 2011, with net profit falling 74 percent in 2011.

Many downstream enterprises are suffering due to the price surge in 2011, with some closing their operations, Chen said. Rising prices have forced many manufacturers to switch to other materials or seek new markets for rare earths, he said.