China's control of the global rare-earth industry is surging toward the top of the global policy agenda. But what should be done?

U.S. Secretary of State Hillary Clinton is raising the issue ahead of this week's meeting of the Group of 20 nations in South Korea, as are business groups around the world. Some have said China should face international pressure at the G-20 to export more rare-earth minerals. There are also suggestions that the U.S., Germany or Japan should file a complaint over China's export quotas at the World Trade Organization. Meanwhile, Japanese users of the metals are already scrambling for alternative supplies.

But, as important as rare earths may be for high tech and military applications, is all this fuss worthwhile for an industry only worth some $2 billion annually? And if it is, then is confrontation the best strategy?

In an interview with The Wall Street Journal in Hong Kong on Wednesday, Molycorp Inc. (MCP) Chief Executive Mark Smith revealed that his company, which occasionally imports metals from China, has experienced extra scrutiny of documents by China Customs that add 'just a couple of days' to shipment times.

The main issue, Smith said, is likely a 'desire to make sure what is being exported from the Chinese ports is being legally exported' as the government pinches smugglers. New Customs questions, he said, are usually related to proving quota allocation and price for the goods.

Smith said the global priority should be to get alternative producers going, including mines from Australia's Lynas Corp. (LYSDY, LYC.AU) and Molycorp that are due to restart production in 2011 and 2012, respectively.

Globally activity is already ramping up quickly, as old industries such as the oil sector and new ones such as battery makers clamor for answers. As this production outside China comes online, supply will actually outstrip demand by around 20,000 metric tons in 2015, according to a presentation by two of the world's leading rare-earth analysts reviewed by The Wall Street Journal.

In their joint presentation for an industry event, the analysts, Judith Chegwidden, managing director of Roskill Information Services, and Dudley Kingsnorth, executive director of Industrial Minerals Co. of Australia, put global demand at 185,000 metric tons in 2015, up from 125,000 metric tons in 2010.

A California investor, commenting on the presentation, said such figures suggest the idea that China's lock on rare earths will constrict global industry is mostly hype. 'Now there's a larger [looming] disparity between supply and demand,' he said.

A U.S.-based rare-earth trader who is bullish on the sector in the short term quipped about a recent jump in rare earth prices: 'It's overdone, but it's not done.'

Others said demand is merely delayed as a result of uncertainty about what China will do. That may give impetus to find alternative technologies in industries such as oil refining and as new applications such as magnetic refrigeration get delayed.

'I wouldn't take away the fact that they are reducing demand. They are only reducing demand because they can't secure supply,' said James Tuer, president of Hudson Resources Inc. (HUDRF, HUD.V), which is developing a rare-earth production base in Greenland.

Production takes years to come online. A presentation by Nicholas Curtis, CEO of Lynas and posted to the Australian Stock Exchange website on Wednesday, underscored the challenge in man-hours for one of its projects: 300,000 for engineering and four million for construction.

Molycorp's Smith said leaders, whether at the G-20 or elsewhere, do need to discuss rare earths, which are 'at the very base of almost every manufacturing sector,' but in a collaborative, rather than, combative way. Technology exchanges, primarily to help China clean up its industry, could be at the heart of any international efforts as well as better international exchange of information about the sector.