Recipe for Disaster

Today in the newspaper I read that China was considering limiting the amount of rare earth it exports to other countries. Since China produces about 97 percent of all the rare earth metals used in electronics, such as integrated circuits, LCD TVs, and other high-tech components, this limit would do two things: raise prices on all these components and force companies to build more electronics factories in China to skirt the limit on raw materials.

Although these rare earth elements exist in other countries, for a long time it has been cheaper to get them from China, so potential rare earth supplies in other countries were not developed. Because rare earths are used in relatively small quantities to build relatively high-value goods, their shipping costs were negligible. Now that the prices of these rare earth materials are rising, other sources outside China are being developed, but they will not be ready until 2015.