The Government Accountability Office said China processes almost 97 per cent of the world's supply of these elements, which have special electromagnetic properties, and although the US has deposits of rare earth ore, it won't likely be produced until 2012.

Furthermore, the US has lost the necessary capacity to refine rare earth material, and rebuilding the supply chain may take up to 15 years.

“China's dominant position in the rare earths market gives it market power, which could affect global rare earth supply and prices,” the GAO said.

While the military needs the rare earth materials for many of its defence systems -including missiles, satellites and radar systems - commercial use includes hybrid electric motors and batteries, wind power turbines, computer hard drives, mobile phones, cameras, energy-efficiency light bulbs and fibre optics.

Availability of these elements will largely be controlled by Chinese suppliers for at least the next several years.

The auditor said government and industry officials believe China was planning to increase export taxes on the materials to15-20 per cent, and that the country was also using production quotas to limit supply.

“While China is currently exporting rare earth oxides and metals, some rare earth industry officials believe that in the future China will only export finished rare earth material products with higher value,” the GAO said.

A company called Molycorp Minerals, owned by Chevron, has a large deposit of rare earth elements at its Mountain Pass Mine in California. But the mine lacks manufacturing assets to process the ore into finished components. Also, it doesn't have “heavy” rare earth elements necessary for industry and military hardware. Other deposits exist in the US and elsewhere, but it could take nearly a decade just to get production online.