Precious metals stocks have been on a tear as prices for the metals rise over inflation, supply, and Chinese stockpiling concerns. While the mining industry prospers, customers are beginning to look for ways to deal with surging commodity costs.

Miners soaring
In the medals group, gold rose nearly 25% in the past year, bringing along with it gold producer NovaGold Resources (AMEX: NG). The company's shares rose more than 140% this past year, juicing the returns of legendary hedge fund manager John Paulson. Silver rocketed 90% year-over-year. This helped Silver Wheaton's (NYSE: SLW) stock rise 136% after the company nearly doubled its earnings. Lastly, copper rose roughly 35%, with producers like Taseko Mines (AMEX: TGB) parlaying the metal's appreciation into similar share price gains. Taseko also tried entering the gold industry as gold commands higher prices, but it had its mine application turned down by the Canadian government.

And that's not even the hottest part of the metals market.

As anyone who hasn't been living in a mine knows, the rare earth metals space is on fire. Many companies have grown concerned with China stockpiling metals. This and the rebounding economy have caused prices to soar and have opened the door for more expensive producers to begin operations. Molycorp (NYSE: MCP) and Rare Earth Elements (AMEX: REE) are prime examples. Both are ramping up operations as demand is expected to continue to surge. Both have mines in the development stages and don't currently produce metals in significant quantities.

A player in the rare metals space that is producing metals (palladium and platinum) is North American Palladium (AMEX: PAL). The company's stock has risen 92% this past year, matching palladium's 91% gain, while platinum rose a more modest 18%, respectively. Rare metal rhodium only slightly rose this past year, 4%, while there are no pure play companies available in the U.S., its status as the most expensive metal for its usefulness and rarity has customers locking in supply.

Customers react
Businesses that require precious metals are getting hit by higher costs and have begun to search for ways to mitigate price increases. Some speculators believe that demand for the metals will only increase and that substitutes are unavailable, but that's not stopping some companies from taking action.

Glassmaker Corning (NYSE: GLW) uses platinum and rhodium in its production process for its glass. The company has stockpiled $2 billion in metals of mostly platinum and rhodium. The company has been signing long-term contracts to guarantee supply for their operations. In talking with the Wall Street Journal, Corning Treasurer Mark Rogus said, "Our main objective is to provide certainty of the price, rather than speculation." He added that Corning's scientists have started searching for ways to need less of the metals or find substitute materials -- but without much luck so far.

Toyota Motors has also been looking for work-arounds. Last month, the company announced it would search for methods to build hybrids and electric vehicles without rare earth elements. Other companies are taking a different tact and are passing costs directly onto consumers. Eastman Kodak, for one, requires a large amount of silver to produce its film. The company has begun indexing the price of film to silver prices, effectively passing off its increased costs and maintaining its margins. The company also continues to shift toward more digital offerings, substituting out the company's need for silver.

Precious metals stocks face many headwinds as supply increases. As more companies begin searching for alternatives, demand assumptions should be reconsidered. If you are interested in following these companies, we can help you keep tabs on them with My Watchlist, our free, personalized stock tracking service. Click below to add any of these metals stocks to your watchlist.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.