Jack Lifton, an independent consultant and a world expert on REEs, said: "A real crunch is coming. In America, Britain and elsewhere we have not yet woken up to the fact that there is an urgent need to secure the supply of rare earths from sources outside China. China has gone from exporting 75 per cent of the raw ore it produces to shipping just 25 per cent, and it does not consider itself to be under any obligation to ensure supplies of rare earths to anyone but itself. There has been an effort in the West to set up new mines but these are five to 10 years away from significant production."

After decades in which they were considered little more than geological oddities, rare earths have recently become a boom industry after the invention of a succession of devices, including iPhones and X-ray machines, which rely on their specific properties.

Global demand has tripled from 40,000 tonnes to 120,000 tonnes over the past 10 years, during which time China has steadily cut annual exports from 48,500 tonnes to 31,310 tonnes.

Worldwide, the industries reliant on REEs, which produce anything from fibre-optic cables to missile guidance systems, are estimated to be worth £3 trillion, or 5 per cent of global GDP.

Beijing announced last month that it was setting exports at 35,000 tonnes for each of the next six years, barely enough to satisfy demand in Japan. >From this year, Toyota alone will produce annually one million of its hybrid Prius cars, each of which contains 16kg of rare earths. By 2014, global demand for rare earths is predicted to reach 200,000 tonnes a year as the green revolution takes hold.

Nearly all of China's supply of rare earths comes from a single mine near the city of Baotou, in Inner Mongolia. The remainder comes from small and sometimes illegal mines in the south of the country, leading to devastating pollution from the poisonous and sometimes radioactive ores.

Eoin Treacy's view Most western governments are offering subsidies to green energy and technology ventures. These tend to range from encouraging R&D for new fuels and batteries to building wind farms, solar power stations and electric cars among a host of other initiatives. However, all of these comparatively high tech solutions share a common reliance on rare earth metals for which supply is inelastic.

China has a monopoly on rare earth metal supply. This situation was allowed to develop during the bear market for resources because the extraction and environmental costs were high, making mining these metals uneconomic. China, with some of the world's largest reserves stepped in, ignoring the environmental cost. Now that demand for these products is increasing and supply is beginning to be viewed as a national security issue rather than simply an economic one, we can expect countries to promote the extraction of these resources domestically where possible. This suggests that a bull market for the metals could develop for as long as it takes new supply to be brought to market. Also see Comment of the Day on December 14th, 15th and September 10th.

A number of the better performing rare earth related shares accelerated to medium-term highs by Q4 last year and subsequently pulled back rather sharply. However, they all now appear to be finding support and just about every share in the rare earths sector posted upward dynamics last week. Here is a pdf of a Performance Filter with the 15 shares, we know of, involved in this sector.

While Avalon Resources, Neo Material Technologies, Rare Element Resources, Matamec Explorations, Quest Uranium and Alkane Resources are showing clear upside leadership, most of the other shares are also trending upwards. Arafura Resources, Greenland Minerals & Energy, Lynas Corp, Ucore Uranium and Rare Earth Metals all have catch-up potential and would need to take out the progressions of rising major reaction lows to question scope for further upside.