I always tell my students who think that dumping and international predatory pricing are bad, from a consumer perspective "Hurt me some more!" Bring on the lower prices.
Tim Worstall makes a similar point in his piece about rare earth production in China:
[T]he truth is that though most of the rare earths, both metals and oxides, do come from China, this isn't the same at all as having a monopoly that is sustainable -- as Beijing is about to find out in a fairly painful manner. Now that the specter of a monopoly being exercised for political ends has been raised, there will be sufficient political will to break that monopoly.
Two important facts about rare earths help explain why: They're not earths, and they're not rare. China has reached its dominant supplier position through good old-fashioned industrial aggression, not innate geographical superiority. Cheap labor, little environmental scrutiny, and a willingness to sell at low cost [sic] have made other producers give up. For competitors, like the owners of Mountain Pass, a California mine that shut down in 2002 partly due to the China factor, that has been a daunting combination. For the rest of us, it has been fantastic: Affordable rare earths have helped power the information-technology revolution, driving down the cost of everything from hybrid cars to smart bombs.
But the non-rarity of the rare earths themselves means that China's position isn't sustainable. That California mine, for instance, could potentially supply 20 percent of world demand, currently around 130,000 tons a year. Another facility, Lynas Corp.'s Mount Weld in Australia, has the capacity to produce a similar amount. In fact, there are enough rare earths in the millions of tons of sands we already process for titanium dioxide (used to make white paint) to fill the gap, while we throw away 30,000 tons a year or so in the wastes of the aluminum industry. There's that much or more in what we don't bother to collect from the mining of phosphates for fertilizers, and no one has even bothered to measure how much there is in the waste from burning coal.
If rare earths are so precious, why isn't the United States working harder to collect them? The main reason is that, for these last 25 years, China has been supplying all we could eat at prices we were more than happy to pay. If Beijing wants to raise its prices and start using supplies as geopolitical bargaining chips, so what? The rest of the world will simply roll up its sleeves and ramp up production, and the monopoly will be broken.
Worstall continues, pointing out that gearing up production outside China will not be quick or easy, but his point is a very good one. Let me add that if users of rare earth minerals are concerned about continued supplies from China, they (and speculators!) will have a very strong incentive to stockpile supplies.
And that is where Worstall possibly goes a bit astray from his usual common sense approach. He concludes his article with,
In the end, the question of whether China has been using its rare earths access to threaten Japan doesn't matter as much as the possibility that it might -- and the certainty we'd better do something about it.
Just who is this "we" he is saying had better do something? Is he talking about speculators who might stockpile supplies now in anticipation of making profits should China decide to use its current dominant position in rare-earth production for political purposes? Or is he saying that private entrepreneurs should be re-opening mines and refining processes outside China so they can profit from the possible reduction in supplies from China? If he means either of these two possibilities for "we" then I heartily agree.
I hope by "we", Tim doesn't mean gubmnt policy makers. There is no good reason for taxpayers outside China to support, or to trust their politicians to support, rare earth operations so long as China is willing to donate the products to the rest of the world.
And the risk? If it is too costly for private entrepreneurs to bear the risk of gearing up production now, it is difficult to understand why or how politicians would be in a better position to assess and assume (on behalf of the taxpayers) the risk.
In fact, the major risk of gubmnt involvement at this point is the uncertainty on the part of entrepreneurs about what gubmnts might do. If there is a risk that politicians might try to influence developments in the industry, there will be a strong incentive for entrepreneurs to wait on the sidelines and NOT undertake what would otherwise be profitable, speculative investments.