The last time China tried to throw its weight around in the rare earths market it all rather backfired. As I predicted it would at the time in fact:
China’s Tried This Before Of Course
Another reason to think they’ll tread carefully is that China has tried this before, back in 2010. And as I pointed out back then – while it was still happening – it wasn’t going to work: If rare earths are so precious, why isn’t the United States working harder to collect them? The main reason is that, for these last 25 years, China has been supplying all we could eat at prices we were more than happy to pay. If Beijing wants to raise its prices and start using supplies as geopolitical bargaining chips, so what? The rest of the world will simply roll up its sleeves and ramp up production, and the monopoly will be broken.
Four years later Marginal Revolution pointing out that I did in fact get that right: Bonus points to Tim Worstall, economist blogger and rare earth dealer, who in 2010 at the height of the crisis pointed out that rare earths were neither rare nor earths and China’s monopoly had been won only by low prices that accrued to our benefit. Well, that’s my ego polished for the day.
A reasonable conclusion therefore would be that China’s not going to try that again.
You know, maybe?
However, if it does all kick off then do understand the truly basic point here. Don’t go and buy rare earths. Last time around a bunch of spivs started selling them fraudulently as suitable retail investments. I’ve been offering expert evidence in a number of trials over the past few years and I’m not aware of one that hasn’t ended in convictions as yet….