The development of the market for rare earth elements: Insights from economic theory

In this paper, a clear and structured economic model is introduced to illustrate complex past and future developments of the market for rare earth elements (REE). The model consists of a sequence of four supply and demand models that give explanations how the mining and separation step of the REE value chain could concentrate in China. Furthermore, the sequence allows giving a coherent scenario for the future developments of the REE market. According to this scenario, the market could transform into an at least oligopoly due to a growing market demand. The validity of this scenario is discussed and evaluated from the perspective of western countries, investors and China. Additionally, a scenario, based on the models, of a propagating monopoly along the value chain is discussed. Finally, suggestions are made for western governments to promote the transformation and lead it to a positive outcome.