China once again threatened the world to limit rare earth supplies. However, this time, the outcome is not what is expected. Rare earth is an essential component to manufacture multiple technological products including weapons systems and more.

The predictable perverse effect on China’s threat is pointing towards a supply glut and price crash. As China saw problems with Australia’s rare earth market, which also happens to be the second-biggest supplier of rare earth in the world; China is the biggest supplier of rare earth is fighting to limit the supplies because of domestic competition. The over-production of rare earth in China is resulting in domestic competition and crashing prices.

The developing financial market is matching the exotic materials such as praseodymium and neodymium, which are used to manufacture magnets for advanced aircrafts such as the F-35 fighter and electric cars. Moreover, there is a race to develop mines and challenge China’s monopoly in this sector.

The Information and Technology Minister of China, Xiao Yaqing, briefed the media that the rare earth is sold for cheaper prices, because of the growing domestic competition.

A combination of more than 17 elements is categorized as rare earth and the elements cannot be separated to make each one usable, other than the name, these are not exclusive. The only reason for its demand is that it contains praseodymium and neodymium, which are in demand.

The largest rare earth supplier of the country, Amanda Lacaze, Chief Executive of an Australian company, Lynas Corporation believes that we may overbuild mines in the race to combat China’s dominance. Moreover, she says that inefficient allocation of capital would end up in losses for investors.

However, the statistics show an opposite outcome. Following Lacaze’s warning, a piece of news broke, which announced the successful capital raising by upcoming rare earth supplying companies like Hastings Technology Metals. Moreover, Iluka Resources was also in negotiation with governments to seek rare earth from a proposed refinery in Washington.

Other than this, the non-Chinese suppliers are making efforts to promote and boost the rare earth industry in countries like Canada and the US. Moreover, the new organizations for alternative supplies of rare earth other than China may repeat the history. It may result in a rift between China and Japan that resulted in the ban of Chinese rare earth supplies and Japanese funding Mt Weld mine.