Rare earth elements

Building a liquid crystal display? Then you'll need some europium. A compact disc? Minute quantities of dysprosium are a must. Fibre optics? You're sunk without erbium. These and 13 other rare earth elements (REE) are the most important substances you've never heard of, being absolutely vital for applications from hybrid cars to guided missiles. Arguably as important as oil to a modern economy or military force, their supply is far more concentrated. While the Organisation of Petroleum Exporting Countries can make the world shudder with its 40 per cent of crude supply, China has 98 per cent of REE production, leading the late Deng Xiaoping to remark that "the Middle East has oil, but China has rare earths".

It was not always so. Until the mid-1980s, a single US mine was the world's main source of REE. Environmental concerns and low prices saw it shut and China cornered the market. It would take years to bring a handful of alternative sources onstream. This might not be a problem were it not for transparent Chinese attempts both to corner the market and to manipulate exports. Chinese firms have bought stakes in Australian and Canadian rare earths prospects and have tried unsuccessfully to buy the still idle US facility. Export tariffs and recent proposals from Beijing to lower quotas mean that technology companies have a greater incentive to move production to China. The Pentagon, meanwhile, has raised the alarm over the US military's vulnerability in the event of an armed conflict with China.

The rest of the world need not assume that China will press its monopoly economically or militarily, but remaining oblivious to the possibility is foolish, no matter how obscure or hard-to-pronounce these vital substances are. As Woody Allen once said, "Paranoia is knowing all the facts."