Magnetics Business & Technology - Summer 2012 - (Page 25)

By John eBeRT, Business manaGeR • yunshenG usa GUEST COLUMN Rare Earth Crisis Dissected: Options for the Marketplace 2011 was a tumultuous year in the Rare Earth Material (REM) marketplace, particularly for NdFeB-based materials. REM prices skyrocketed beyond rhyme or reason. The global supply chain was strained beyond capacity. Supplier relationships were damaged or even destroyed. Chinese mine operators and refiners and RE magnet factories drastically reduced capacity or closed en masse. Every materials scientists, design engineer, purchasing manager, project manager and chief executive needs to take stock of the recent past to understand the future impact of RE on their designs, costing, procurement and supply chain. This article will approach the RE crisis in three parts. 1. The Root Causes: A review of the events leading up to the RE crisis. 2. The Fall-Out: The victims and impact on industry. 3. Securing the Future: Options for recovery. The Root Causes: A Crisis in the Making For the past decade until recently, Nd oxide ranged between $25 to $45/kg and Dy oxide ranged between $150 to $200/kg. Almost 20 years ago, Chinese mines priced REM so cheaply that it forced most non-Chinese mines out of the REM marketplace, including the USA’s own Molycorp. Sparked by Chinese Rare Earth Ore (REO) policies and fueled by speculation, Nd oxide reached almost $300/kg while Dy oxide reached more than $2200/kg. The Fall-out: An Industry Under Siege Many supply chains, unable to build in or pass on REM costs to their customers, cancelled orders or drastically reduce inventory. The hardest-hit industries include electronics, linear motors, speakers and hard disk drives. Some companies resorted to sourcing unlicensed REM to survive. Other supply chains re-design applications to reduce or eliminate NdFeB materials. The HVAC industry was the most aggressive in this regard, as ferrite magnets continue to dominate this vertical. The NdFeB manufacturing industry experiences severe factory closures throughout China, with an estimated 70 percent of factories shutting their doors during the crisis. Some factories sold their REM inventories rather than fulfill orders. Many surviving factories operate at 25 to 30 percent capacity, as of April 2012. Even the Chinese government was surprised by the domino effect of the REM crisis on downstream manufacturers using REM materials. Motor manufacturers, electronics factories and assembly houses were severely impacted by the lack of NdFeB components. The Chinese government consolidated the REM mining industry by Oct 2011. Almost immediately, they instituted a new policy for REM producers to certify all REM sales to legitimate manufacturers (non-speculators). Meanwhile, China continues to seek REM sources outside of China. Non-Chinese REM suppliers and operations proliferated globally. Currently, there are an estimated 300 REM mining projects outside of China. Major foreign players (Molycorp, Lynas, Great Western) have advanced their intended production schedules. However, non-Chinese REM production is not ex- Chronology of a Global Debacle • Early Jan 2011: Chinese government announces a 30 percent reduction in Rare Earth Ore (REO) export quotas over 2010 levels. • Mid-Jan 2011: Chinese government launches its anti-black market campaign against illegal REO mining and distribution. 2010 sales records indicated 90,000 tonnes of legal REO sales versus 120,000 tonnes of black market sales. • Feb 2011: Chinese government proposes new REO anti-pollution policies to be implemented by Oct 2011. • March 2011: Chinese government increase taxes on Chinese RE mine operators. Light RE taxes increase by 10 percent; heavy RE taxes increase by 20 percent. • April 2011: Industry responds with attempts to stockpile REO, RE alloy and RE magnets, thereby triggering non-industry speculation. • July 2011: Rampant non-industry speculation reaches its peak forcing REO prices to historical highs. • Sept 2011: Chinese government consolidates the number of mine operators and refiners through government-sanctioned mergers, buy-outs and takeovers. • Oct 2011: New REO anti-pollution policies take effect. • Nov 2011: In an effort to curb speculation, Chinese government requires all mine operators and refiners to certify all REO sales to legitimate NdFeB manufacturers. REM marketplace enters freefall. • Dec 2012: Nd and Dy prices drop to 40 percent of their historical highs. • April 2012: At time of writing, REO prices continue to stabilize. Article continued on pAge 26 www.MagneticsMagazine.com 269.694.9466 ■ www.tengam.com 25 Summer 2012 • Magnetics Business & Technology http://www.tengam.com http://www.tengam.com http://www.MagneticsMagazine.com

Table of Contents for the Digital Edition of Magnetics Business & Technology - Summer 2012

Magnetics Business & Technology - Summer 2012
Editor's Choice
Injection Molded Magnets for Electrical Machines
The Process of Developing and Testing a New Transformer
Rare Earths & Corporate Social Responsibility
Research & Development
RE-use, RE-duce, RE-cycle, RE-place
Magnets • Materials • Measurement
Application • Component Developments
Industry News
Rare Earth Crisis Dissected: Securing the Future
Marketplace
Advertising Index
Spontaneous Thoughts: The End of Axial Pressing?

Magnetics Business & Technology - Summer 2012