On 11/29/2012 6:38 PM, Dan Minette wrote:
They used the low price tactic to drive out virtually all
other rare earth suppliers a bit over a decade ago, and are now in a
position where the startup costs are high for other countries, and any
country with pollution regulations would have a hard time competing. So,
using this tactic, they could keep a monopoly, once they established it.
Well, I just noted that a new technology has come along that replaces
much of the use of rare earth elements (it had to do with electric
motors). This is one of the reasons you have to be slightly skeptical
about attempts to use predatory pricing to create monopolies. The very
act of raising prices creates a strong incentive for substitutes, among
other things. I just did a Google search on "rare earth substitutes"
that brought back a number of recent articles about how rare earth
prices were falling as a result of manufacturers finding substitutes,
and other articles about how manufacturers are finding those substitutes.
Now, I cannot say exactly how this will play out since predictions are
hard, especially when they are about the future. ;) But there is a
concept in economics called "hysteresis" that says that changes once
made are sometimes hard to reverse. A great example of this was the
automobile market in the 1970s. When oil prices rose, consumers went
looking for fuel-efficient autos. When U.S. manufacturers could not meet
this demand, they turned to the hitherto ignored Japanese cars. This led
them to discover a previously unknown fact, that those cars were of
higher quality than American cars. As a result, even when oil prices
fell, the market share of Japanese autos did not fall back to its
previous level. A "permanent" change had occurred in consumers'
preferences. It is at least conceivable to me that the research into
alternatives to rare earths will result in a "permanent" fall in demand
for them.
Regards,
--
Kevin B. O'Brien
zwil...@zwilnik.com
A damsel with a dulcimer in a vision once I saw.
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