The nation of China currently produces enough rare earths to meets its own rapidly expanding demand, as well as 95 percent of demand in the rest of the world. However, as China consumes more and more of its own rare earth production, it is exporting less and less to other nations. 

In fact, exports now expected from China in 2011 are not enough to meet rest of world (ROW) demand, as the chart at right shows.  That is why there are global shortages in 2011 of many rare earths, with more shortages expected in 2012.

The chart below demonstrates the projected escalation in demand growth for rare earths between 2010 and 2020. Overall growth will exceed 100% between now and 2020, and high-powered rare earth magnets lead individual category growth with 9.9%:



The next chart compares projected ROW demand against the steadily decreasing Chinese export quotas. While projected demand decreased slightly between 2010 and 2011, the 'red zone' gap between China's supply and the ROW demand in 2011 is roughly 29,500 metric tons (mt) of rare earth oxide (REO). Additional factors, such as national stockpiling efforts, the growth of wind power, and the potential for China to become a net importer could broaden the red zone gap even further.


Given China's continued dominance of rare earth production its actions have an outsized impact on global supply projections. China continues to signal that it does not intend to continue serving as the world's producer of rare earths and that it intends to keep more of its material for domestic use. It also continues to tighten its control of the industry through forced consolidation, production quotas, increased environmental regulations, and a crackdown on illegal exports. The result is less material available to the rest of the world and upward pressure on rare earth prices:




Driving China's domestic focus is its skyrocketing internal consumption of rare earth materials. Over the past decade, China has greatly expanded the number of advanced technology manufacturers in-country that require rare earth materials for their production.  Given the many jobs that are associated with this manufacturing and China's efforts to continue to pull additional manufacturers into its country, this growth trend in internal rare earth consumption is expected to continue: