Prices of rare earths are set to fall further in the next few months as oversupply and lower prices for other commodities hurt offtake, said experts.

"Traders are selling their existing stocks as the State Reserve Bureau, which manages China's strategic stockpiles, did not purchase any rare earths in September and dampened expectations of higher prices," said Xu Ruoxu, an analyst with Shenwan Hongyuan Securities.

Trading volumes for rare earths continued to remain depressed despite an increase in upstream shipments as downstream merchants are not keen on fresh purchases, traders said.

Prices of several rare earth varieties such as praseodymium neodymium metal and neodymium praseodymium oxides fell on Tuesday after a huge decline in September.

The production reference price of the oxide domestic products of praseodymium fell by 20,000 yuan ($3,036) per metric ton to reach 420,000 yuan to 440,000 yuan per ton on Tuesday, with an average price of 430,000 yuan, according to statistics from Baichuan.com.

The prices of most commodities have been falling since September as speculators have taken a backseat for now, said Zhan Sheng, investment director of JZ Investment. "With huge amounts of money flowing out of the market, prices are bound to fall."

Rebar steel prices have witnessed a steady decline since reaching a high of 4,097 yuan per ton on Sept 1, without a significant rebound.

Iron ore prices have fallen 25.2 percent since September and declined to 436 yuan per ton on Wednesday.

On Sept 28, the Ganzhou Rare Earth Group Co Ltd released a shut-down initiative by the Southern Ionic Rare Earth Enterprise Alliance on its website.

The alliance has urged all enterprises including mining companies, smelting separation companies and comprehensive recycling companies in the group to cease operations for a month.

If the initiative is implemented, it would lend support to the market and not cause too much disruption, said Zhan, adding that only such measures can to some extent arrest the downtrend.

From the middle of September, prices of neodymium oxide, dysprosium oxide and praseodymium oxide have dropped with rare earth index continuing to decline.

As of Sept 28, the average price of praseodymium oxide was 460,000 yuan per ton, down 19.5 percent from the previous high of 550,000 yuan per ton, according to the statistics from Baichuan.com.

Although China Southern Rare Earth Co Ltd is reported to have shut down production, the market is yet to see its impact on rare earth prices.

"The proposal is not mandatory and hence many of the companies in the alliance may not even follow it," said Xu, adding that it was difficult for companies to stop production by assessing their own profit status based on the current prices.

According to statistics from the United States Geological Survey, total global rare earth reserves were about 120 million tons as of 2016, with China accounting for 36.67 percent of the total. However, the country produced 105,000 tons last year, 83 percent of global output.