An article about rising prices and China's decision to reduce by 40% their export quota of "rare earth" commodities such as cerium, lanthanum and yttrium, which are used in the manufacturing of flat-screen monitors and aerospace alloys among other things, appeared in the September 4 edition of the Economist. China "accounts for almost all of the world's production" of rare earths.
The article, entitled 'Digging in', reports that "announcements of rare-earth projects have accelerated in recent months", as "high prices have already begun to propel a supply response elsewhere in the world."
More interestingly, discussing the possible motivations behind China's new export quota on rare earths, the Economist speculates that China is leveraging its virtual monopoly on rare earths in an attempt to control more of the secondary sector production of high end goods which require them.
While at this time Western markets may be able to absorb the higher costs of these elements and eventually balance and diversify their supply, rare earths can be added to the growing list of commodities, critical to the West's consumption based economies, who's futures are uncertain. The situation also highlights China's unapologetic pragmatism and self interest as far as the security of the supply of resources to its economy is concerned. While such self-interested behavior is not exclusive of other powerful nations, might China's willingness to nearly half their exports in rare earths suggest something of the shape of things to come?
Read the Economist article at http://www.economist.com/node/16944034
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