If they then decide to flood the market with LRE it will all but eliminate the nascent industry outside of China. If they choose to ignore the ruling what risk do they run in the world economic community when they (like the Arabs during the oil crisis) have us over a barrel.

The value added piece is critical, the raw and processed material is incidental. The intermediate products like magnets, optics, etc. and developing larger assemblies is where the money is and China controls most of that as well.

@MANAMOHAN PURANDHAR – will post more as soon as we hear the outcome of the expected appeal.

@Gennady – given that there 55+ projects which have defined mineral resources, I’m not sure that finding new deposits of REEs is the problem…

@Mike Holt: tying into my last comment – I completely agree that the issue for the REE sector outside of China is the downstream value-add portion that also predominately exists in China. The good thing is that unlike the REE deposits themselves, we can move that part of the supply chain fairly easily….

@Simon Schillebeeckx – interesting piece that you wrote. I don’t think that REE prices are so meticulously set I’m in the way that you describe (social marginal cost / marginal cost etc). It is also likely (though not definite) that any appeal will be on the basis of the facts previously presented, and since China did not, to my knowledge, mention Article XXXVII in its responses to the WTO Panel, it’s unlikely that it’ll come up now. BUT – you never know, and it’s certainly an interesting avenue.

Thanks a lot for your article, very interesting. I’d be interested in your views on the blogpost I wrote following reading your account.
You can find it here:
http://imperial-business-blog.com/2014/04/05/after-the-wto-ruling-can-china-appeal-successfully/

– rare earths mining companies inside and outside of China;

– producers of rare-earths-based components in downstream industries inside and outside of China; and

– Chinese and non-Chinese end users of products containing rare-earths-based components.

Next, it would be interesting to learn what, if any, actions are being taken to develop downstream industries outside China capable of producing rare-earths based components critical to many high tech applications, and whether any end users manufacturing products reliant upon rare earths will acquire upstream businesses in order to ensure access to the rare earths based components required for their products to remain competitive in the global marketplace.

Even though the market for rare earths is relatively small, and competition from Chinese producers of rare earths and rare-earths-based components will further limit the potential size of profits that can be generated from sales of rare earths and generic rare-earths-based components, the profit margins on end products benefitting from the unique qualities imparted by rare earths can be very significant. As such, this would seem to create an incentive for manufacturers of higher-margin end products to take steps to ensure access to these critical components even if the relatively small cost of those components was modestly higher relative to their costs if they were purchased from less reliable sources.

For example, paying $0.15 rather than $0.10 for a component that will result in much higher sales volumes of products generating profits of well over $100.00 per unit should be recognized as a sound investment, even if China does decide to abide by WTO rulings, for now.