Magnetics Business & Technology - Winter 2017 - 6

FEATURE ARTICLE

NdFeB Magnet Prices Should Increase in 2018
By Walter T. Benecki

The global permanent magnet industry is
currently facing some exciting growth opportunities. The automotive industry is abuzz over
the anticipated growth of hybrid and electric
vehicles. In fact, some countries have actually
dictated that the internal combustion engine will be banned in a
specific number of years! In the face of such proclamations, some
experts are questioning whether some of these countries (India, for
instance) will actually have sufficient electrical generating capacity
to support such a shift.
A lot is at stake for the permanent magnet industry. If Tesla's
anticipated growth of their Model 3 electric vehicle meets expectations, that model alone will consume massive quantities of NdFeB
magnets. It has been reported that the 500,000 Model 3's initially
ordered will consume approximately 600 tons of incremental demand for NdPr oxide. Certainly, a lot of money is being invested
in the electric vehicle scale-up, all along the supply chain. Major
magnet producers like Hitachi and Shin-Etsu, as well as most of the
licensed Chinese producers, have been increasing their capacity to
meet future demand. The unknown regarding Tesla is what their
2018 production will actually be. The company is claiming that the
current Model 3 production delays are not significant.
It's worth noting that we do not believe that the anticipated
success of electric vehicles is necessarily a slam dunk. Recently,
we've seen arguments that hydrogen-powered vehicles represent
a superior technology. Even if hydrogen technology is proven to
have merit, it will have absolutely no impact on the likely explosive
growth in electric vehicles over the next few years.
In addition, the magnet industry continues to face the reality
that China will continue to dominate the global production of rare
earths for a long time to come. It's true that the recent success of
Lynas has propelled them to being a supplier of ~10% of current
global production, but that may not be enough.
Chinese government policies aimed at restricting or managing
rare earth mining, tariffs and other export regulations cannot provide the magnet community a feeling of comfort or security. We
have also seen numerous projections over recent years that China
will actually be importing rare earths to satisfy the continued surge
in their domestic requirements. We believe that this trend will likely materialize over the next few years. In addition, as long as China
remains the dominant rare earth producer, unpredictable political
rifts between governments always loom as a potential triggering
event.
The result is an ongoing concern about future prices of rare earth
magnets....and in the worst case, the possibility of significant raw
material shortages which could once again ripple through the magnet industry. It's a proven fact that rare earth prices can be volatile.
Raw material prices in 2018 are likely to inflict some pain. Some
industry observers are shrugging off 2017's early run-up in rare
earth prices. Indeed, there has been a moderate correction in
prices during the last few months of the year. However, if you are
budgeting for modest increases in raw material prices in 2018, it is
recommended that you be prepared to move decisively if excessive
price increases resume.
And then there is the ongoing litigation over the validity of a
number of Hitachi's NdFeB patents. Hitachi has recently suffered
some setbacks in the courtroom, but anyone declaring that Hitachi
is "on the ropes" could be seriously mistaken. Hitachi has financial

Magnetics Business & Technology * Winter 2017

strength, strong legal representation and a massive patent portfolio.
So, we would recommend caution to those who are anticipating
an "open market" for NdFeB magnets. Surely, the sustained dominance of Hitachi's proprietary strengths does represent an interesting future uncertainty. This question is not likely to be resolved in
2018.
Beyond electric vehicles, there are many existing and new applications that will be consuming significant quantities of NdFeB
magnets. Global energy conservation initiatives will continue, and
this will certainly favor the utilization of permanent magnet motors
in a variety of industrial, commercial and consumer applications. It
has been recently projected1 that global demand for five specific
applications will reach 53,000 tons of NdFeB magnets per year by
2020: Data Storage, Hybrid/Electric Vehicles, Wind Turbines, Electric
Bicycles and Air Conditioning. That's a significant level of NdFeB
magnet demand, and 2020 is right around the corner! We can only
conclude that requirements for rare earth magnets will be accelerating at a significant pace over the next few years.
One would think that this projected growth should be favorable
for magnet producers. Double-digit growth theoretically favors
higher prices, which should translate into improved profitability.
However, as we have pointed out in previous articles, large scale
consumers of magnets do everything within their power to leverage their attractive volumes to achieve the lowest possible prices.
And some in the magnet industry have occasionally exhibited the
willingness to quote marginal (low) prices to book what appear to
be attractive orders. Sometimes, this strategy may work, but many
times this approach has backfired, and in a few cases, has actually
led to bankruptcy.
Lastly, we continue to see a number of new start-ups touting the
benefits of recycling rare earth permanent magnets. The recycling of NdFeB magnets, either from a fabricator's scrap or magnets
recovered from end products like motors or disk drives, has recently been taken on by a number of start-up recyclers. This writer
continues to have reservations regarding the ultimate economic
feasibility of recycling NdFeB magnets from end products. Once
much of the "low hanging fruit" has been recovered, there is a real
question whether these magnet recyclers will be able to achieve a
sufficient return on their investment. We do not expect independent recyclers to contribute much incremental rare earth supply in
2018. On the upside for recyclers, the major factor impacting their
success or failure will be the market prices for rare earths, so their
near-term outlook appears positive.
In summary, global rare earth supply is not expected to keep
up with demand in 2018 and we therefore expect price increases
during the year. This will impact magnet producers, distributors,
magnetic assembly producers, motor manufacturers and magnet
recyclers. The good news is that the overall demand for NdFeB
magnets will continue to increase at an attractive double-digit pace.
1 "Worldwide Electrification - Consequences for Permanent Magnet Materials",
Steve Constantinides, Presentation at Ames Laboratory, November 1, 2017.

About the Author - Walter T. Benecki was president of Arnold Engineering
(now Arnold Magnetic Technologies) from 1989-2001and served as president
of the Magnetic Materials Producers Association from 1994-1997. Walt published "The Global Permanent Magnet Industry" in 2017 and he is currently
editor of "The Permanent Magnet Industry Newsletter". Walt has been a
principle or strategic advisor for numerous acquisitions, dispositions or joint
ventures within the magnet industry. www.waltbenecki.com.

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