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Kai Ryssdal: Gold hit a two-month high today: $1,248 an ounce. As attractive as gold is when the economy is questionable, though, neodymium may be a more important metal today. What's that? You never heard of it? What about lananthanum? They're what're called "rare earth metals." There are about 17 of them. They're used pretty extensively in things like hybrid cars, and smartphones and a lot of other gadgets we are coming to depend on.

Thing is, China produces almost all of the world's rare earth metals. And last month Beijing cut way back on exports of them.

Our China Bureau Chief Rob Schmitz reports.


Rob Schmitz: There are more than 50 pounds of rare earth metals under the hood of a Toyota Prius. They're the magnets in the car's electric motor, and a big part of its long-lasting battery. Electric vehicles use even more.

At this year's China Rare Earth Summit in Beijing, a lot of foreign visitors were looking worried.

Dudley Kingsnorth: My plea today was "China, you are the leader, yes, but as the leader, you've got responsibilities."

Dudley Kingsnorth is an industry consultant. What's scary to him is not that China controls the world's rare earths. It's that China doesn't want to share. It's put quotas on the amount it exports. Last year, China allowed less than half of what it mined to be sold to the rest of the world.

Kingsnorth: Now, if these quotas stay in place, then what's going to happen is that less and less of the manufacturing is going to take place in the U.S., and more and more of the manufacturing is going to take place in China. And we all know once those manufacturing jobs have gone, they're gone. It's not a temporary situation.

And that could be bad news for the Obama Administration. The president wants a clean energy work force to help revive the U.S. economy. Industry insiders say China's export quotas are already causing a global shortfall of rare earths. Toyota wouldn't comment on how this is impacting production of the Prius, but the company is reportedly looking to Canada to find more of these minerals.

This seems like a logical solution -- you see, rare earths aren't that rare. North America sits on 15 percent of the world's reserves. But there's one small problem, says commodities analyst Jack Lifton.

Jack Lifton: I don't think America's going to produce any rare earths, because I believe we cannot do it economically.

But that hasn't stopped one American company, Molycorp, from trying to resurrect a mine in southern California that once coughed up more than half the world's supply. But Lifton says it's too late to compete with China.

Lifton: We've been outfoxed in capitalism by our friends, the communists!

Lifton blames decades of outsourcing by American businesses.

Lifton: They gave away the farm. They gave away the intellectual property, all of this technology given away, to get access to raw materials and cheap labor. And now all of the sudden, it's a problem. Fortunately for the Chinese, the same stupid people run the American economy that ran it into the ground.

And that's good news for Zhang Anwen. He's a government official with China's Rare Earth Association. When asked why China was cutting off the global rare earths supply, he smiled, played it safe and towed the party line, quoting China Premier Wen Jiabao.

Zhang Anwen: China will not completely stop exporting rare earth metals to other countries. The most important thing is to set a reasonable price and a reasonable volume of production. However, China will continue to put quotas on exports.

That's small assurance to companies that need rare earths to keep their products tumbling off the production line. But industry insiders say there's at least a little hope. The U.S. government is asking business groups to provide evidence that China is hoarding rare earths supplies -- a possible case for the World Trade Organization.

In Shanghai, I'm Rob Schmitz for Marketplace.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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