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High-strength magnets, computer hard drives, aerospace components, satellites and lasers have something in common – they contain rare earth elements. Rare earth elements (REE) are a group of 17 chemically similar metallic elements found abundantly in the earth’s crust and include scandium, samarium, cerium, yttrium, and holmium. REEs must be mined, separated into individual rare earth oxides, refined, formed into rare earth alloys and then manufactured into components. The United States, China, and the Commonwealth of Independent States hold 67 percent of the worlds mine reserves. U.S. rare earth manufacturing began to decline between 1998 and 2005 with China now controlling 95 percent of the rare earth production.
Over the last year, China has announced that it would cut exports of rare earths primarily to conserve supplies for its own industries. China has decreased the export of rare earths by 35 percent this year – from 22,282 metric tons (first round of quotas) to 14,446 metric tons, a trend that started in 2009. China releases export quotas on a six month basis with the second export quota number released after the government's evaluation of the first quota.
The reduction in China’s export quotas have caused the prices of REE’s to increase. The price of samarium, for example, which is used in the manufacture of missiles, rare earth magnets, lasers and masers has increased from about $8 to $66 dollars per pound. At the same time, export taxes for some rare earth elements from China will increase 25 percent this year. The demand for REEs is expected to double over the next five years from 120,000 tons to 250,000 tons
In 2010, the Defense Department undertook a study on REEs but as of April 2011 the report had not been released nor has DOD said if or when it plans to release the report. The United States does have one rare earth mine production facility, which is expected to open in 2012. A 2010 GAO report indicated that to rebuild the U.S. rare earth supply chain could take as long as 15 years and will require the purchase of patents held by international companies. The availability of REE is a concern for AIA as having a consistent, cost-effective supply of materials is critical for our long-term competitiveness.