Rare earth elements (REEs) are a group of seventeen elements with
exotic names like neodymium and yttrium that are key ingredients in many
high-tech products, many important for national defense. Imagine the
consternation of Western officials when they woke up one morning in
September 2010 to learn that China held a near-monopoly in the
production of these vital materials. In retaliation for the collision of
a Chinese fishing boat with a Japanese Coast Guard vessel near a group
of disputed islands in the East China Sea, China threatened an embargo.
Prices of REEs soared.How did China become the world’s leading producer of REEs? Did the 97 percent market share it held in 2010 represent a true natural monopoly? At the time, I wrote that its hold on the market was more fragile than it appeared. The erosion of China’s dominance of REEs holds important lessons for all supposed natural monopolies.
The first clue should have been that rare elements are not really rare. All seventeen rare earth elements are more abundant in the earth’s crust than gold, and some of them are as abundant as lead. The thing that makes them hard to mine is the fact that they do not occur in highly concentrated deposits like gold and lead. Even the best REE ores have very low concentrations. On the other hand, such ores exist widely throughout the world. Until the 1960s, India, Brazil, and South Africa were the leading producers. From the 1960s to the 1990s, the Mountain Pass Mine in California was the biggest source. China’s began to dominate of REE production only in the late 1990s. >>>Read more
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