Intriguing.

There are a couple of gaps that I noticed, and - given the obvious implications of one country controlling 97% of an apparently vital resource - it would be good if the author, or anyone else knowledgeable on the topic, could fill them in.

>>China owns 97 per cent of known deposits of rare Earth minerals... rare Earth magnets used in electrical engines is the next key strategic resource<<

Are rare Earth minerals the only available material for this purpose? Or simply the most efficient?

Put another way, can "magnets used in electrical engines" be produced without the aid of rare Earth minerals?

I would consider this to be a major factor in determining the "key-ness" of the resource.

>>China is readying itself to take up the mantle of car manufacturing superpower by buying up intellectual property owned by an American company but developed by European engineers.<<

Does the IP concerned include rare Earth-related know-how? Is this know-how superior to that already developed in the US and/or Europe?

Given that raw materials are important, but transformation capability is even more important (or why would we be selling iron ore and coal at the rate we are?) this is surely a further factor in the "key-ness" of rare Earth minerals.

>>The most likely scenario is that China has adopted a long term plan to build electrical engines to power Chinese-made cars of the future.<<

OK. But the question that still remains is why did they actually need to buy Volvo in order to progress this plan?

Also, given the depth and paranoia of the US rules covering the export of US-owned technology, how did Ford persuade the government to approve the deal?

Bicycles are OK as long as its not raining, its not too hot, you don't have too much to carry with you, you are not wearing your best clothes, you feel well, you are not disabled, there are few hills, you don't live too far away from work and you don't mind dicing with cars.

I have previously seen comment on the rare earth mineral problem.
I believe it is real and that China has announced it intends to cease
export of those products.
As they do produce the major part of available supplies it could be a
problem.
However, as far as I am aware they are used for some engine metals
in internal combustion engines and in high flux magnets.
This may not be a problem for electric cars as they will predominately
use AC motors and will not require magnets.

I also would like to know more about this problem.

I'd be interested in your source, Bazz.

>>I believe it is real and that China has announced it intends to cease export of those products.<<

There appear to be companies in China offering rare earth minerals today...

http://www.baotou-rareearth.com/?gclid=CKv8vNiF4p8CFY0vpAodwE0cHg

"HEFA Rare Earth Canada Co. Ltd. brings you the opportunity to purchase rare earths directly from one of the world's largest and most experienced producers. Our parent company, Baotou HEFA Rare Earth is located in Baotou, China - a region with 80% of the world's rare earth resources."

I couldn't find any press releases etc. that suggest a withholding of supply, either.

Pericles,
It was a couple of months back and was an item on Business Spectator.
Do a search on here;

http://www.businessspectator.com.au

Pretty certain that is where I read it.

I think you may find this is what you are concerned about Bazz.

>>http://news.smh.com.au/breaking-news-business/china-to-limit-rare-earth-exports-20090902-f8an.html<<

The key points are;

"The United States supplied nearly all its rare earths needs from its own mines as recently as 1990, the USGS said. But it said American output plunged as the market was flooded with low-cost ore from China, which has lower labour costs and less-stringent environmental controls."

So it was not a matter of availability that created China's status as "world's leading supplier". It was simply that they flooded the market by undercutting everyone else.

"China, which produces 95 per cent of the world's rare earth metals used in superconductors, hybrid cars and other high-tech devices, plans to limit its exports to prop up prices and conserve its reserves, an official said Wednesday."

Pushing up the price will encourage re-opening of mines that became unprofitable in the face of China's market dumping activities.

"Inner Mongolia's government has also suggested setting up a national reserve mechanism for rare earths to stabilise prices, Zhao said. 'We are not taking a short-term view of just trying to prop up rare earth prices,' he said."

Panic over.