China is the world's largest producer of rare earth metals, a collection of seventeen chemical elements found together on the periodic table with names like lanthanum, neodymium and samarium. These metals are increasingly important to electronics and technological advancements. Recently, China has begun to reduce the amount of rare earth metals that it produces, and it has also enforced embargoes, halting the export of rare earth metals to certain countries. (To learn more, see Rare Earth Metals: Shrinking Supplies Amid High Demand.)

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Applications of Rare Earth Metals
Rare earth metals are important to the electronics industry, where they are used at the consumer level in the manufacturing of cell phones, computer memory chips, DVD players, plasma televisions, rechargeable batteries, magnets, catalytic converters, fluorescent lighting, cameras and e-readers. At the military and defense level, rare earth metals are vital components of such valuable technology as night-vision goggles, precision-guided weapons, anti-missile defense and the "white noise" that is utilized in stealth technology. Rare earth metals also have alternative energy applications; they are used in the production of batteries for hybrid and electric automobiles, as well as generators for wind turbines.

Are Rare Earth Metals Actually Rare?
Despite their name, rare earth metals are not especially rare. Extracting and processing these elements, however, is challenging. They are geographically scattered; that is, they occur in small pockets rather than in widespread regions of the planet, making them difficult to extract economically. Additionally, the processing of these metals can produce environmentally threatening toxins such as cadmium, as well as radioactive waste. Most rare earth metals are found in deposits of the minerals bastnaesite and monazite; monazite is associated with radioactive materials, making the processing of rare earth metals inherently hazardous. Rare earth metals, then, are not rare but are beset with economic and environmental concerns and challenges.

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China's Role in Rare Earth Metals Production
China is responsible for approximately 97% of the world's rare earth metals mine production. In 2009, for example, China produced 120,000 metric tons of rare earth metals, far beyond the mining results of all other countries combined. In addition to being the largest producer of rare earth metals, China is the prevailing consumer, using the metals in a vast array of electronics slated for domestic and export markets. China has imposed export restrictions to ensure a supply for domestic manufacturing of electronics and other technology dependent upon rare earth metals. In conjunction with tighter controls over exports, safety and environmental issues will likely increase operational costs for China, resulting in higher prices for rare earth metals. Indeed, following China's 2010 announcement regarding the restriction of exports, rare earth metal prices quickly achieved record high levels. (For more, see China Keeps Its Rare Earth Minerals At Home.)

China recently halted exports of rare earth metals to Japan following a maritime incident in which Japan accused China of holding up rare earth shipments to Japan - the accusations were denied by Chinese officials. There is also speculation that China may expand the embargo to include other countries, including the United States and Europe. (For a related reading, see The Power Of Economic Sanctions.)

The demand for rare earth metals is expected to increase each year, as more electronics and green technologies depend on these important chemical elements. China, as the world's leading producer of rare earth metals and related electronics, is currently in the driver's seat. A report released early last year by the U.S. Government Accountability Office - "Rare Earth Materials in the Defense Supply Chain" - estimates that building a rare earth metal supply chain within the United States could take up to 15 years and would involve a series of complications including developing new technologies and obtaining patents that are at presently held by international companies. As China continues to protect its supply of rare earth metals, other countries around the world will be forced to develop their own production capabilities in order to meet the growing demands for rare earth metals. (To learn how you can get in on China's growth, check out Investing In China.)

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