Doom for ex-China Permanent Magnets

16 11 20 07:52
Look at this global market share of NdFeB permanent magnets, made from ~25% neodymium, ~5% praseodymium, ~1% dysprosium, ~1% terbium and the rest is iron (magnetite):
27343c67-c5ad-4c98-9a42-8d5692740e2d_553x336
Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast Blue is China, red is Japan, green is others.

With Japan’s Hitachi Metals for sale, quite possibly to a dominant magnet company in China who happens to have a joint venture with a US-owned magnet maker in Germany, China’s world market share in NdFeB magnets may rise above 90%.

China’s 2019 output was 180,000 t of NdFeB magnets. Here the growth history for China’s output of NdFeB magnets (in ten thousands of metric tons):
7f802bd8-3dc9-421c-8de5-7be43fab1536_578x345
Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast

Yes, it doubled from 2012 to 2019.

And now here the growth forecast for NdFeB magnet production in China until 2025 (in ten thousands of metric tons):
3e1e290b-63f1-4c10-891a-ca9749218fa6_568x340
Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast

2025 is an increase of more than 35% over 2020.

Only about 20% of that is export to more than a hundred countries. Largest export destinations are Germany (18% of exports), Japan and USA (each 12% of exports). A large part of the exports to Germany is probably production of a German-Chinese joint venture in Beijing.

Now one could conclude, that the West not only depends on China’s rare earths, but also on China’s permanent magnets.

We think the West is about to move past that point: The western import dependence is on components and products manufactured from rare earths and permanent magnets, moving a step higher on the value chain that current concepts suggest.

One of the current battles is on for the dominance in traction motors for electric vehicles, containing NdFeB magnets (we reported).

Are junior rare earth miners beating a dead horse?

One thing for sure, for consumption in the West we currently need an additional large rare earth mine as urgently as we need a third shoulder.

What? Why?!

In the first half 2020 China exported 142 t neodymium oxide, valued at US$ 6.7 mio, 24 t less than in the second half 2019.

Further 77.7 t of praseodymium oxide, valued at US$ 3.45 mio, 42 t more than in the second half of 2019.

Yes, we know that the bulk of China exports and the bulk of western demand are dirt-cheap lanthanum and cerium, but the noisy hype is about neodymium and praseodymium.

There is no point opening or even planning to open an operation that churns out thousands of tons of NdPr with almost nowhere but China to go to.

Only if demand in the West should increase more than 10 times, there may ba a point.

There are forecasts to that effect, however, many previous spectacular forecasts in the rare earth scene flopped, seriously undermining general credibility of rare earth consumption forecasts.

These forecasts are not made by fools, but most forecasts simply underestimate China dynamics. Read on.

China steamrolls the market for permanent magnets

See again the Chinese NdFeB magnet production output graphic from China for the year 2019:
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Source: 2020 China Rare Earth NdFeB Material Market Research Report-Industry Status and Future Business Opportunities Forecast

And now understand, that according to this article the China province of Zhejiang alone has a NdFeB capacity (capacity ≠ actual production) of 115,600 tons, representing 38.7% of China’s total NdFeB capacity:
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This suggests, China’s total NdFeB capacity already now is close to 300,000 tons. The China forecast is an actual production output of 260,000 tons by 2025.

Forecasts for 2025 world NdFeB magnet demand of the usual western suspects are much lower than that.

Overcapacity and overproduction, which usually has an adverse impact on prices, particularly, if there is competition for market share.

Little wonder that Hitachi Metals want to rid themselves of their magnet business, in view of the expiry of their core patents and this China magnet tsunami.

Assume you are a western NdFeB magnet producer, you will have to pay the China price for the rare earth input, no matter if the supplier is in China or elsewhere. The trouble is, that China price includes China VAT and China does not refund its 13% VAT upon export of rare earth products, while domestic VAT is cost-neutral in-out.

So as a non-China NdFeB magnet producer already your raw material cost are already 13% higher than any China domestic NdFeB magnet maker.

To add injury to insult, Chinese NdFeB magnets get a full VAT refund upon export.

This means almost certain death for non-China based permanent magnet production when competing with China, but it is great news for those who buy permanent magnets.

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