A Chinese embargo on rare earth elements is causing a dramatic spike in the price of materials, which is expected to lead to a jump in high-tech product prices before settling back down in a few years, according to report released today.

Prices will increase rapidly until "non-Chinese rare earth mines are up and running, increasing product availability and thereby decreasing prices," wrote Robert Castellano, president of The Information Network, in a research note today. (See: Pay dirt: Why rare earth metals matter to tech (FAQ).)

But for the time being, Castellano points to some alarming statistics. In semiconductor manufacturing, where rare earth materials are used as high-k dielectric films and as polishing materials in chemical mechanical polishing, prices of ceria for certain applications have increased more than 1,000 percent in the past year. Ceria is also used in the polishing of glass disks for hard disk drives, LCD panels, and high brightness LEDs.

And price hikes of 170 percent in the past year for Europium are now reaching manufacturers of end products, Castellano wrote. Europium is a rare earth used as a phosphor in cold cathode fluorescent lamps in laptop backlights and plasma display panel TVs. Neodymium is also in short supply with price increases of 420 percent in the past 12 months. This rare earth element is used in magnets for hard disk drives, wind turbines, and hybrid electric vehicles.

"During the past 20 years there has been an explosion in demand for many items that require rare earth metals. China capitalized on its rich rare earth deposits and cheap labor to drive down prices to a point that nearly every mine outside China was forced to shut down because they couldn't compete on price," according to Castellano.

"We estimate that the Chinese held 90.0 percent of capacity of rare earth oxides with 103,300 tons, but its share will drop to 67.2 percent in 2014 based on output of new mines coming on stream," said Castellano. "China's capacity will only increase 10.4 percent to 114,000 tons between 2010 and 2014, whereas non-Chinese capacity will increase nearly 5 fold, from 11,500 to 55,800 tons," he wrote.