The same question could be asked of the rare earth metals market.

Rare earth metal prices have been falling steadily for the last couple of years, in spite of China reducing export volumes. Usually a reduction of supply results in a rise in prices, but the falls are indicative of the size of the REE bubble that had formed around the turn of the decade.

Chuin-Weip noted in the WSJ last week that Chinese exports had plummeted 71% in 2012 from 2011; however, this year has seen a remarkable change – exports have been picking up, with April’s figure of 2,196 metric tons almost six times larger by tonnage from a year earlier and a 28% rise from March, according to China customs data quoted in the article.

China exported 6,112 tons of rare earth metals in the first four months of this year, as the authorities approved higher export quotas and demand from China’s principal REE export market picked up. The U.S., you may think? Nope – Japan.

The country’s industrial base has responded strongly to stimulus measures, including massive money printing and a substantial reduction in the value of the Japanese Yen to post impressive economic growth in the first quarter.

Japan consumes some two-thirds of China’s RE exports and as GDP rose at an annualized rate of 3.5% in the first quarter compared to 1% in the previous six months, the industrial base has taken the opportunity of cheaper REE prices to re-stock.

Nevertheless, global rare earth prices remain weak.

The value of China’s rare earth exports for the first four months of this year came in 63% lower than a year earlier, at $136 million, according to customs figures quoted in the WSJ. But the pace of the price slump is slowing from the 70%-to-80% declines posted earlier in the year; although if they had continued at that rate, some REEs would have been given away.