Rare earth mineral supply is tightening

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BEIJING, Dec. 29 (UPI) -- Supplies of legal and smuggled rare earth minerals from China used in production of electronics are tightening, a London expert in rare earths said.

"We do believe that this source of supply is diminishing, and there is some evidence leakage over the border into Vietnam is diminishing," Judith Chegwidden, managing director at Roskill Consulting Group, said, referring to the route smugglers take from southern China.

Analysts estimate half the world's legally sold rare earth minerals, such as dysprosium, terbium and europium, come from China, primarily southern China. About half comes from the same source, but is mined illegally and smuggled out of the country.

China controls about 99 percent of the world's supply and said this week export quotas for the first half of 2011 would be lowered 35 percent, The New York Times reported Wednesday. There is evidence the country is cracking down on illegal mining operations. A source in China said 100 mine owners and managers had been arrested recently.

The supply issue made headlines in mid-September, when China cut off shipments of rare earth minerals to Japan after Japan arrested a shipping boat captain in disputed territorial waters.

That embargo, which lasted more than two months, was partly undermined by smugglers who continued to operate. But it sharply highlighted a supply chain Achilles heel, given Japan's and the world's reliance on supplies from one country.

Pricing also tells part of the story. Dysprosium that costs $6.50 a pound in 2003 now goes for $132 a pound, the Times said.

That makes the rare earth minerals even more precious as a political doorstop, an industrial component and as a smuggler's commodity.