The correct answer is option 3, which indicates that both statements 1 and 3 are correct.

Let`s go through all options:

Option 1: This statement is true. China is indeed the largest producer of rare earth metals and has previously imposed restrictions on their export, which can contribute to their shortage.

Option 2: This statement is false. Rare earth metals are not only found in China, Australia, Canada, and Chile. They are found in various parts of the world, although in varying amounts. Therefore, this option cannot be the correct answer.

Option 3: This statement is true. Rare earth metals are crucial for producing many electronic items, and with the increasing demand for these items, the demand for rare earth metals is also growing.

Option 4: As already mentioned, statement 2 is incorrect, hence, option 4 containing all three statements cannot be the correct answer.

Thus, statements 1 and 3 explain the concern for the short supply of rare earth metals, making option 3 the correct answer.