Are we headed for a rare earths bubble?

Jack Lifton suggests we are. The culprit is China’s squeeze on the 17 high-tech metals — a 40 percent drop in exports during the summer, followed by an unannounced boycott of Japan over the last couple of weeks. By Lifton’s count, five mining companies seeking to cash in on the shortage are trying to raise $500 million or more in investment. One of them, Australia-based Greenland Minerals and Energy, is seeking a whopping $2.3 billion, while Molycorp., wishing to re-open a mine it purchased several years ago in California, is asking for $500 million.

The companies are responding to a perceived threat to the world’s high-tech future, including advanced batteries, wind energy, and numerous electronic products.

The Catch-22, however, is that if all these mines succeed they could swamp the market. The resulting price plunge would satisfy Toyota and Panasonic, big users of neodymium and other rare earths, but that would only be short-term gratification. China would be certain to drop its own prices, and contribute to the great sweating of its mining rivals. At the Wall Street Journal, David Fickling writes that the plans of Molycorp and Australia’s Lynas Corp. alone would add the equivalent of 35 percent of China’s current production to the market. On top of that, Japan has scavengers poring over the world’s scrap electronics to recycle the rare earths contained within, as Hiroko Tabuchi reports at the New York Times.

None of this means that the companies will withdraw their entries. Beiing’s recent actions are only in part punitive — China, itself developing increasing numbers of products that use the rare earths, wants to hang on to more of them — but the supply shrinkage has awakened the world’s other industrial countries to the need for alternative suppliers.