The prices of rare earth elements, which have enjoyed a three-year run, are dropping rapidly, reports New York Times.

The reason, says The Times, is on the manufacturing side, as big companies in the US, Europe and Japan that use REES in manufacturing move operations to China, draw down inventories, and look for lower-cost substitutes:

International prices for some light rare earths, like cerium and lanthanum, used in the polishing of flat-screen televisions and the refining of oil, respectively, have fallen as much as two-thirds since August and are still dropping. Prices have declined by roughly one-third since then for highly magnetic rare earths, like neodymium, needed for products like smartphones, computers and large wind turbines.

As an example, German parts supplier Continental has come out with an electric motor deployed by Renault that operates without permanent magnets.

PR Newswire reported today that the rare earths industry is at a turning point, as new, non-Chinese supply comes onstream, thus serving to break the monopoly by China, which controls 94% of rare earth production. Changes are also afoot in China as the Asian country consolidates rare earth mines and imposes more regulations on the industry:

Since 2006, Chinese government controls on output, such as mining licences and quotas, have become more effective. In 2011, further controls were introduced and all companies mining rare earths will now be required to show that they have mandatory production plans, appropriate planning permission, environmental certification and safety licences. In addition, companies exceeding the production quota can have their licence to operate revoked. In 2011, the Chinese government also introduced tighter controls on emissions from processing plants, which came into force on 1st October.

By 2015, the rest of the world will account for a quarter of rare earth supply, and is likely to increase up to 2020, reports PR Newswire. The article also notes that magnets accounted for 27% of total rare earth demand in 2010, compared to 13% in 2000. Magnets are also the most valuable rare earth subsector, accounting for 47% of value in 2010. Demand for magnets is being driven by growth in elecric cars, hard disc drives and personal audio equipment.

MINING.com reported Nov. 6th that a temporary production stoppage by China’s largest rare earth exporter makes the creation of an American rare earth stockpile more likely. The stoppage was a “wake-up call” for the US Department of Defense because the rare earth elements are needed for a variety of defense applications, wrote dealReporter, citing a congressional source.