Supply and demand normally determine the market price of a commodity. As supplies shrink, prices go up. As prices go higher, those who control the supply are tempted to sell. Mining companies see high prices as an opportunity and attempt to develop new sources of supply.

With rare earth elements, the time between a mining company’s decision to acquire a property and the start of production can be several years or longer. There is no fast way to open a new mining property.

If a single country controls almost all of the production and makes a firm decision not to export, then the entire supply of a commodity can be quickly cut off. That is a dangerous situation when new sources of supply take so long to develop.

In 2010 China significantly restricted their rare earth exports. That was done to ensure a supply of rare earths for domestic manufacturing and for environmental reasons. This shift by China triggered panic buying, and some rare earth prices shot up exponentially. In addition, Japan, the United States, and the European Union complained to the World Trade Organization about China’s restrictive rare earth trade policies.