It always comes back to magnets
During our last week in the US, Randy and I were surprised by the announcement that Hitachi had filed a complaint with the US ITC regarding rare earth magnets and products containing rare earth magnets that they believed to be in violation of a few of their lengthy list of patents governing NdFeB magnets. Much of the material alleged to be in violation originated in China.
There are only a select few of the hundred-plus of Chinese rare earth magnet producers that have licenses from Hitachi to produce NdFeB magnets in China for sale or distribution in the territories the patents cover (link is to a pdf). Especially as some of the patents are reaching the expiration date, unlicensed magnets have found their way into the US and EU markets. Ten years ago, when I worked for an American rare earth magnet company, we often complained how difficult it was to compete with Chinese manufacturers, even those licensed. Today, now in China, we are experiencing something similar. Magnet companies that do not have the Hitachi license have lower prices because they are not paying royalties. And in the past several years, there has been little in the way of policing the license situation, so there have been no penalties.
Had I been on the ball and blogged about the ITC complaint when it was announced, I would have most likely connected the timing of it with Hitachi's current round of negotiations for extending their agreements with the Chinese producers. The old contracts are also nearing their end, and Hitachi has been pressing the licensees to extend for several more years. I suspected that Hitachi's announcement was orchestrated to demonstrate that, yes, they will still protect themselves and their licensees.
However (there had to be a "however"), since then I have also had the opportunity to read through the complaint itself (again, link is a pdf). Important to the US ITC processing a case like this is data concerning how it would affect American businesses. Previously, when the ITC was petitioned to stop unlicensed NdFeB magnets from entering the US, Magnequench still operated factories in the states. Since then, every single NdFeB licensee in the US has shut down production, Hitachi in Edmore, Michigan, included. There were no American businesses to protect...until Hitachi announced it wanted to re-establish their rare earth magnet manufacturing in the United States.
In the ITC complaint, Hitachi's near-term plans are detailed in Sections 269-282. The revelation in Section 279 that start of production will be April 2013, at an initial capacity of 40 tons per month, is particularly interesting. For good measure, too, the complaint describes the raw materials will be sourced from another American company, Molycorp. We knew that Hitachi's new American rare earth plant was soon to start production, but it was nice to see more precise timing and intended tonnage in writing.
Of course, since this is a dispute between a Japanese company (that operates on American soil) and a number of Chinese interests, this gets further complicated by the activity surrounding those disputed islands. One possible response to both Hitachi and the Japanese rare earth importers in general could be to shut off their Chinese supply (again). Randy (and the China Daily, FWIW) think that there are enough in stockpiles in Japan to get their industry through any interruption until larger volumes are available from non-Chinese sources like Viet Nam or California.
I also cannot help but wonder at how this ITC action will impact the broader market for NdFeB magnets. After the last few years of shortages, ridiculous price increases, and general instability. there were already large purchasers of NdFeB magnets that reverted to designing with the lower energy-product strontium ferrite magnets. The ITC action is already impacting licensed NdFeB producers as written and pursued. The question raised on what defines a "licensed NdFeB" magnet only adds to the headaches buyers have endured recently. A few weeks ago I thought the ITC action would help strengthen the industry. Instead, it may actually damage the already fragile demand.
Of course, since this is a dispute between a Japanese company (that operates on American soil) and a number of Chinese interests, this gets further complicated by the activity surrounding those disputed islands. One possible response to both Hitachi and the Japanese rare earth importers in general could be to shut off their Chinese supply (again). Randy (and the China Daily, FWIW) think that there are enough in stockpiles in Japan to get their industry through any interruption until larger volumes are available from non-Chinese sources like Viet Nam or California.
I also cannot help but wonder at how this ITC action will impact the broader market for NdFeB magnets. After the last few years of shortages, ridiculous price increases, and general instability. there were already large purchasers of NdFeB magnets that reverted to designing with the lower energy-product strontium ferrite magnets. The ITC action is already impacting licensed NdFeB producers as written and pursued. The question raised on what defines a "licensed NdFeB" magnet only adds to the headaches buyers have endured recently. A few weeks ago I thought the ITC action would help strengthen the industry. Instead, it may actually damage the already fragile demand.
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