1. There's plenty of iron ore.
2. No they can't. Its not the raw materials that lack elsewhere, its the refinery technology. Separation is very tricky. The former premier corporation in rare earth refining, Molycorp, just doesn't have the ability to refine heavy rare earths, and heavy rare earths is the most profitable part of the operation.
A USCC report shows you how much technology there is in rare earths, why no one else can really do it as effectively anymore (remember, you're aiming at a moving target. Lots of countries can make a 1990 Toyota, but a 1990's Toyota won't sell, and that's why there's only 1 Toyota).
Current State of China’s Domestic Rare Earths Market
Today, China dominates almost all steps of the rare earth supply chain, from mining to the
manufacturing of permanent magnets used in high tech applications.
*
Not only does China produce
approximately 97 percent of the current world supply of rare earth elements, but it also produces 97
percent of rare earth oxides, and supplies 100 percent of rare earth refining capacity. (For more
information on the rare earth supply chain, see Appendix C.)