China and rare earths: Of metals and market forces ALL that glisters is not gadolinium. Even so, that mineral and its 16 "rare earth" cousins - found in everything from batteries to catalytic converters - do help make the modern world go round. And, as the world's manufacturers of such products have been reminded recently, China has a chokehold on their production. China's grip on rare earths first made headlines in 2010, when it suddenly cut exports to Japan. But it had been squeezing the market for years. In 2000 it exported some 47,000 tonnes of the stuff; by 2010 it exported only about 30,000 tonnes. This decline appeared to be the result of unfair export taxes and quotas. Western powers have threatened to take the case to the World Trade Organisation (WTO). This week they seemed to get a boost when that body ruled against China on a related case. On January 30th an appellate body of the WTO ruled that China's policies to restrict exports of several metals, like bauxite and magnesium, violated its WTO obligations. American and European officials cheered, arguing that China's rare-earth policy must now also be scrapped. Some pundits say China might even pre-empt further legal action with a deal to drop its quotas. Such celebrating may be premature. For one thing, China's leaders have taken a hard line on trade of late, imposing fresh tariffs on imported poultry and sport-utility vehicles. On the heels of this week's ruling a Chinese official declared defiantly that "we are fully prepared" to fight any challenge on rare earths. Gary Hufbauer of the Peterson Institute for International Economics is convinced that China's policies add up to "a disguised restriction on international trade" but cautions that any case on rare earths will be harder to win on its merits than this week's one. That is because there is a stronger environmental argument for restricting the supply of rare earths, the extraction of which produces toxic chemicals. China also has other means of retaining control of the market besides export quotas. It has lots of capacity to refine rare earths, whereas most rich countries do not, so it can exercise control downstream. Rare-earth prices are also not likely to drop soon, even if the WTO rules against China again, because the Chinese have forced the industry to consolidate. There were once many miners but the country has recently shut down dozens of operators in Inner Mongolia and elsewhere. Take the long view, though, and China's policies seem destined to fail. Although the country produces over 90% of rare-earth minerals today, it controls less than half of the global resource base. Restricted supply and higher prices have already spurred the development of big mines in Australia and in America, where a large Californian mine called Mountain Pass reopened late last year. In time, this fresh supply will take market power away from China. For the Chinese, rare earths are simply not rare enough.