Chinese rare earth miners are being forced to phase out excessive production capacity as rising overseas suppliers chip away at their dominance in the global market.

Russia announced in April its plan to invest 1 billion US dollars in rare earth mining in its Tomtorsky field, which holds 154 million tonnes of ore containing several rare earth elements.

Greenland also lifted its long-time ban on rare earth mining in October of this year in hope of developing the industry to support domestic welfare payments and employment.

Other major rare earth consuming nations, such as the United States and Japan, have also looked elsewhere to meet their demand for the 17 rare minerals, which are used to make a range of high-tech products from cell phones and wind turbines to hybrid cars and airplane equipment.

"The future doesn't bode well for Chinese rare earth firms," said Yang Zhanfeng, head of the Baotou Research Institute of Rare Earth.

"While severe overcapacity plagues the domestic rare earth industry, progress in exploiting rare earth reserves in other countries also adds to the pressure on Chinese companies," Zhang said.

Yet many companies told Xinhua it will still be difficult for other countries to unseat China as a major exporter of rare earth elements since overseas mines being explored contain mostly light elements, while the majority of heavy minerals still come from China.

Increased production in other countries has reduced China's share of the global rare earth supply from more than 95 percent to 80 percent since 2010, when China nearly halved its rare earth export quota in a bid to overhaul heavily polluting and unregulated extraction and production.

Chinese authorities have repeatedly said that overreliance on Chinese supply is irrational considering the country's rare earth reserves account for less than 30 percent of the world's total -- a sign that China is overexploiting its rare earth resources to meet global demand.

However, the government's restrictions through export quotas have failed to put the industry on a healthier development track. As a supply squeeze drove up prices, more companies entered the mining and production business, producing more product than the world needs.

In 2000, China was able to produce 8,000 tonnes of neodymium iron boron permanent magnets. More than ten years later, production capacity has grown thirty times, while new factories continue to spring up, according to Wu Chenhui, a Beijing-based industry analyst.

Wu added that more than 20 rare earth firms are building production capacity for an additional 70,000 tonnes this year.

Despite the expansion, analysts say nearly two-thirds of China's production facilities will remain idle.

China has more than 110 rare earth melting and separating firms, with a combined production capacity of 300,000 tonnes annually, but global demand for these minerals has stood at 120,000 tonnes on average over the past few years, said Ma Rongzhang, secretary general of the Association of China Rare Earth Industry.

All this surplus capacity will eventually be phased out as the industry undergoes consolidation, which only large and efficient players can survive, Ma said.

Meanwhile, the rise of foreign rare earth suppliers will also slow down the speed at which Chinese mines are being exploited, according to Zhang Anwen, secretary general of the Chinese Society of Rare Earths.

"Over-reliance on Chinese supply has exhausted domestic mines and brought problems of illegal mining and environmental deterioration. A diversified global supply will give mercy to Chinese mines that have so far been exploited unsustainably," Zhang said.