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Rare earth elements are vital to many modern technologies, and the National Resource Council, which advises the US government on topics of science and engineering, claim that rare earth elements are the most critical minerals in the world. Unfortunately they are incredibly scarce, mined in only a handful of sites around the world, and for all intents and purposes there seem to be no practical substitutes.
Before the 1990s the US produced enough rare earth elements to meet most of its growing demand, however new regulations, and growing competition from China saw their domestic production decline, and by 2000 the US was entirely reliant on imports, with 94% of the international market supplied by China.
But China has restricted supplies in recent years, sending prices soaring by 400% between 2005 and 2011, and creating tension between China and the US, EU, and Japan.
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The National Resource Council then warned the government that growing demand in China could lead to falling supplies on the global market, which could negatively affect the US manufacturing sector, so, after more than a decade rare earth mines are beginning to reopen.
In 2012 Molycorp resumed mining at its Mountain Pass mines in California, and plans to boost production this year to 19,050 tonnes of rare earth oxide a year, enough to meet 10% of global demand.
Molcorp’s Mountain Pass rare earth mine. (CNN Money)
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Unfortunately, whilst prices are high at the moment, niche commodities such as rare earth elements can suffer brutal price cycles, with huge booms suddenly turning into crippling busts. China has already increased its supplies to the market and prices have fallen since 2011 leaving some producers struggling to survive. Constantine Karayannopoulous, the chief executive officer at Molycorp, has even admitted that once “we achieve our full production run rate, it may make sense to dial back production until we can run the facility at lower cost.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com