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China’s most effective weapon in the rare earth war wasn’t a missile, a tariff, or a trade embargo. It was a price tag.

For more than two decades, Beijing has used a remarkably simple strategy to maintain its stranglehold on the global rare earth supply chain: whenever a Western company would get serious about building an independent processing capability, China would act to crash prices. And the result is generally the same: the investment case falls apart, the funding disappears, and the company folds. China’s monopoly survives another cycle.

REalloys, a North American rare earth processor with an operational facility in Ohio and a processing partnership in Saskatchewan, may be the first company positioned to break that pattern…and the reasons why have very little to do with the market and everything to do with how the rules have changed.

How China Won the Rare Earth War Without Firing a Shot

The West handed its rare earth processing capability to China roughly 40 years ago. The last major U.S. rare earth mine, Mountain Pass in California, closed in 2002, unable to compete with Chinese production costs. By 2010, China controlled approximately 90-95% of global rare earth production and an even larger share of the processing and refining that turns raw material into usable metals and magnets.

But dominance alone wasn’t enough. China seemingly sought to make sure no one else could challenge that dominance. How they pulled it off was surprisingly simple: a pricing benchmark called the Asian Metal Index, or AMI.

The AMI is a wholly Chinese-owned and controlled pricing index. For years, it served as the global benchmark for rare earth pricing. And because China controlled both the supply and the index, Beijing had the ability to set prices at whatever level served its strategic interests.

Read more at: Finance.Yahoo.com