Many investors have dramatically expanded their vocabulary over the past few months.

On a smoke break or huddled around the water cooler they’re throwing out words like “ytterbium” and “neodymium” as if holding PhDs in geology, and they even seem know what they’re talking about.

That’s what happens when China decides to restrict the world’s supply of rare-earth metals, which are comprised of 17 elements used in everything from smart phones and big-screen TVs to wind turbines and electric cars.

It wouldn’t be so bad if China didn’t control more than 95 per cent of the market, but because it does a number of rare-earth metal stocks based in Canada, the United States and Australia have been on a wild ride.

Some, such as Molycorp, Rare Element Resources and Hudson Resources, have more than tripled in value over the past five months as investors anticipate the future riches expected to come from filling the Chinese vacuum.

It’s all a bit too much, too fast, and if you’re an investor who jumped aboard late in the game you might want to consider jumping off. For one, the stocks are way overvalued. Second, we’re not as dependent on these oddly-named elements as some might think.

AC Propulsion, a Los Angeles-based maker of electric vehicle motors, went out of its way this week to emphasize that it has been in business for nearly two decades and has not relied on rare-earth metals for the products it produces. This includes induction motors used to power electric vehicles such as the Tesla Roadster and BMW Mini E.

“Induction motors are built with iron, aluminum, and copper, so no rare earth metals are needed,” said AC Propulsion chief executive Tom Gage.

True, many hybrids on the market today use permanent-magnet motors, which require strong magnets made with rare-earth materials such as dysprosium, samarium, and neodymium. But it’s a mistake to think there are no other options and that China has put the market in an unbreakable headlock.

Toyota, which uses permanent magnet motors in its popular Prius and is concerned about the Chinese move, has already said it will move to induction motor technology for future models.

Meanwhile, the move away from nickel-metal hydride batteries, such as those currently used in the Prius, to lithium-ion batteries will further reduce our dependence on rare-earth metals.

Wind-turbine manufacturers also have options. Permanent magnets are increasingly being used in newer turbines based on direct-drive technologies, which bring certain efficiencies to the system, and this has made the wind industry more dependent on rare-earth metals.

For example, in the offshore wind market about 4 per cent of turbines rely on rare earth metals, a figure expected to rise as high as 25 per cent by 2015. But the industry doesn’t have to go in this direction, and indeed, some of the biggest manufacturers in the wind sector are having second thoughts about direct-drive technology.

“Direct drive turbines use large amounts of permanent magnets compared to geared turbines and are therefore much more dependent on rare earths and the risks and costs that go with them,” says Scott Keating, a spokesman for Vestas Offshore.

“This is one of the main reasons we, in considering our technology choices going forward, are wary of direct drive given the political and supply chain risks associated with rare earths.”

In the area of lighting, linear fluorescent lamps and compact fluorescents depend on rare-earth metals such as lanthanum, cerium and yttrium. The difficulty this poses for fluorescent lighting could end up being a major boost for LED lighting, a far superior technology that can be made without rare-earth metals.

All of this isn’t to downplay the problem. Rare-earth metals might not be must haves, but they’re nice haves, and many companies have designed their businesses around them. The U.S. Department of Energy, for one, is quite concerned about a rare-earth metal shortage that could last 15 years and constrain growth in certain sectors.

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But more non-Chinese mining capacity is coming online. Recycling of these materials is another option. And if that doesn’t work, companies will have to innovate around the problem — and that’s not always a bad thing.

It could even lead to better alternatives, and indeed, such alternatives are already in the works.

Tyler Hamilton writes weekly about green energy and clean technologies. Contact him through www.cleanbreak.ca