What about that Stranglehold
In the past year or so, every time a news headline referred to China's export controls of rare earth material as being a "stranglehold," I would tweet it and reference my favorite Ted Nugent song. Lately, though, there have been fewer opportunities to plant this earworm.
After our US trip this summer, we were starting to see a shift in the rare earth magnet world, away from NdFeB magnets (and the increasing prices of some of the elements specifically found in NdFeB magnets, including Nd, Pr, and, the biggest offender, Dy). We had no idea how extensive and widespread this was among all users of rare earth materials, like batteries, until we started to see the export totals for all rare earths from China. Last year at this time, there was a huge fuss made around the world about the China's export quotas, but this year, not so much. Barely 40 percent of the year's quota had shipped by the end of November, 2011. This year's quota was even expanded to include alloys of rare earth materials that were previously excluded, and allowed for loophole shipments in previous years.
As with the other rare earth applications, the products that use rare earth magnets have alternate technologies available. Some users are going to designs that use other magnet materials (like SrFe or even SmCo, which is still rare earth dependent but has not seen the same price increases that Nd, Pr, and Dy have). Others have worked with magnet-free alternates. In China this is especially true in wind power, a sector once expected to be a huge consumer of NdFeB magnets. Previously, following the lead of largest-in-the-world Goldwind, many Chinese wind turbine producers were taking advantage of the relatively low cost and abundance of NdFeB magnets inside of China to pursue permanent magnet direct drive systems as their preferred technology. However, the price increases of NdFeB magnets forced many to look for cost savings, designing these magnets out of their systems.
With both exports and the domestic market shying away from rare earth materials, the prices for the alloys and concentrates had begun to stabilize since mid-year, and more recently decrease. How far down the prices will go is an interesting academic exercise. In November Randy had a meeting with his American salesman and two of his Chinese co-workers. He presented data about rare earth pricing, including some of his own speculating about where the prices for materials key to them would be going in the next several months. His assumptions were based partly on normal market dynamics and partly on the forces in place in Chinese rare earth supply. When his Chinese coworkers saw his numbers, they shook their heads. There was no way the government would let the prices change in such a way at this point.
While my initial impulse would be to bring up how the same government can't ignore the shrinking market, they likely appreciated the Chinese government's strength better than I could. Since the markets, and particularly exports, aren't growing, the only way to keep the prices buoyed is to cut down supply. This week it was announced that Baotou Steel, the Inner Mongolian rare earth behemoth, is not included in the first-pass list of approved exporters for next year. The reason cited was "environmental concerns," as it was when the mines of Jiangxi province were shut down earlier this year.
Until the mines in other parts of the world are commercially operational, perhaps I have shelved Nugent too soon.
After our US trip this summer, we were starting to see a shift in the rare earth magnet world, away from NdFeB magnets (and the increasing prices of some of the elements specifically found in NdFeB magnets, including Nd, Pr, and, the biggest offender, Dy). We had no idea how extensive and widespread this was among all users of rare earth materials, like batteries, until we started to see the export totals for all rare earths from China. Last year at this time, there was a huge fuss made around the world about the China's export quotas, but this year, not so much. Barely 40 percent of the year's quota had shipped by the end of November, 2011. This year's quota was even expanded to include alloys of rare earth materials that were previously excluded, and allowed for loophole shipments in previous years.
As with the other rare earth applications, the products that use rare earth magnets have alternate technologies available. Some users are going to designs that use other magnet materials (like SrFe or even SmCo, which is still rare earth dependent but has not seen the same price increases that Nd, Pr, and Dy have). Others have worked with magnet-free alternates. In China this is especially true in wind power, a sector once expected to be a huge consumer of NdFeB magnets. Previously, following the lead of largest-in-the-world Goldwind, many Chinese wind turbine producers were taking advantage of the relatively low cost and abundance of NdFeB magnets inside of China to pursue permanent magnet direct drive systems as their preferred technology. However, the price increases of NdFeB magnets forced many to look for cost savings, designing these magnets out of their systems.
With both exports and the domestic market shying away from rare earth materials, the prices for the alloys and concentrates had begun to stabilize since mid-year, and more recently decrease. How far down the prices will go is an interesting academic exercise. In November Randy had a meeting with his American salesman and two of his Chinese co-workers. He presented data about rare earth pricing, including some of his own speculating about where the prices for materials key to them would be going in the next several months. His assumptions were based partly on normal market dynamics and partly on the forces in place in Chinese rare earth supply. When his Chinese coworkers saw his numbers, they shook their heads. There was no way the government would let the prices change in such a way at this point.
While my initial impulse would be to bring up how the same government can't ignore the shrinking market, they likely appreciated the Chinese government's strength better than I could. Since the markets, and particularly exports, aren't growing, the only way to keep the prices buoyed is to cut down supply. This week it was announced that Baotou Steel, the Inner Mongolian rare earth behemoth, is not included in the first-pass list of approved exporters for next year. The reason cited was "environmental concerns," as it was when the mines of Jiangxi province were shut down earlier this year.
Until the mines in other parts of the world are commercially operational, perhaps I have shelved Nugent too soon.
Comments