Rare-earth sounds like something from a science fiction novel in search of another planet for humans to populate. Rare-earth is actually minerals and ore that are dug from the ground and refined for use in making all sorts of things in the electronics and technology world. China supplies about 95% of the rare-earth materials in the world and the nation is tightening its grip on supply of the material and using the tightening supply to drive the price of the material up.
The WSJ reports that in addition to electronics, rare-earth is also used in the making of all sorts of things from laser-guided weapons to the batteries in your hybrid car. China has reduced the quota that can be exported by firms in the rare-earth market and the government has made it harder for companies to enter into the market and expand projects that are working on. The quota for the first half of 2011 is 14,508 metric tons, which is about 35% of the quota from the same time last year.
The taxes on the rare-earth materials have also been raised to about $9.22 per ton (60 yuan). The taxes per ton were previously 40 fen to 30 yuan per ton. China has also started imposing 25% tariffs on exports of alloys with 10% rare-earth content this year. What does this all mean for you? If the raw materials needed for the gadgets and electronics we use each day increase in price eventually the cost of the gadgets and electronics will increase as well.