Spend Matters' sister publication, MetalMiner, tracks the subject of rare earth metals on a regular basis. Usually, they (along with a handful of other niche publications) are the only sites and periodicals that examine the issues surrounding scarce rare earth metals. Recently, however, rare earth metals are getting more national attention, including a recent article in The Wall Street Journal that points out how China has a dangerous near-monopoly on their processing (not to mention their supply). According to the news, the US Federal government auditor issued a warning "on China's power over supplies of rare earth materials vital to the military, mobile phone and clean energy technology sectors ... The Government Accountability Office said China processes almost 97% of the world's supply of these elements, which have special electromagnetic properties, and although the U.S. has deposits of rare earth ore, it won't likely be produced until 2012. Furthermore, the U.S. has lost the necessary rare earth material refining capacity, and rebuilding the supply chain may take up to 15 years."
Moreover, China is beginning to hoard material for itself. This could both drive up global prices as well as cause shortages, depending on how China decides to play its military and political cards. According to the US government report, "government and industry officials believe China's not only planning to increase export taxes on the materials to 15%-20%, the country's also using production quotas to limit supply." Even though it would be easy to point fingers at China for cutting back on supply in its own geopolitical interests, the blame for escalating rare earth prices and shortages rests almost as much with a Western policy that has scorned new mining and raw materials production. The US has taken a similar policy on rare earths to Alaskan oil drilling -- "not in my backyard." Because mining is a polluting and high-risk industry, it's not one that Western countries have focused energy on getting into (or remaining in) -- but this could soon change.
In the meantime, companies in high-tech, medical, A&D and green sectors should look to reduce their supply risk by examining substitute materials as well as buying forward and potentially even stockpiling supplies of rare earths, if economically and logistically feasible. While the substitute materials approach may be a pipe dream for many organizations -- rare earths often bring unique metallurgical properties -- such a strategy may be effective if companies look to Canada and other regions that are increasingly bringing some capacity for certain rare earth metals online (but not others). If you're curious about this subject, I'd encourage you to check out what MetalMiner has to say on the subject. Searching "rare earth metals" on the site will give you a sense of the diversity of their applications and which metals in particular are in question.