China was late to join the race to develop novel rare earth materials, elements that are essential constituents of everything from iPods to Patriot missiles. But Western observers agree that China is catching up fast in areas such as fuel cells and magnetic refrigeration. Today, about three-quarters of the world's neodymium magnets are made in China. Domestic industrial demand is rising: Last year, China consumed 60% of all processed rare earths. That unnerves some industry analysts and U.S. legislators, who have expressed concern about China's dominance of the rare earth supply. Last year, China satisfied 95% of global demand—now about 125,000 tons per year—and holds more than half of all proven reserves. In 2005, prices started creeping up when China began to limit production and slap export tariffs on some rare earths. In a policy paper last month, China's Ministry of Industry and Information Technology floated the idea of prohibiting export of three scarcer rare earths: europium, terbium, and dysprosium. If the Chinese government were to implement such a policy, it would be a big problem for other countries.
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