ferrite magnets
Analysis of the factors and influences of the price fluctuation of magnetic materials
Jul 1,2021.

Since the second quarter of 2020, with the domestic economic recovery, domestic and foreign epidemics, economic and international relations, and factors such as China’s environmental protection and overcapacity at the front end of some related industrial chains, almost all relevant factors have been added to the magnetic material raw materials. The price of magnetic material raw materials is on the road. Many varieties have more than doubled, and individual varieties have increased by more than 3 times, and the supply of some varieties is tight.

Here is a brief analysis of the reasons and effects of the sharp increase in the prices of magnetic materials and raw materials in the past year for the reference of industry enterprises.

The main factors leading to the rise of raw materials in recent years

1. Environmental protection policy restrictions and strict management and control have led to abnormal production and suspension of raw material enterprises

2. Insufficient power supply in winter, and power cuts in many places, resulting in abnormal production of raw material enterprises

3. Production restrictions and process adjustments of domestic steel companies have led to a tightening of domestic iron red

4. The spread of the new crown epidemic abroad has caused some raw material companies to stop production, and exports to China have decreased and prices have risen sharply (such as upstream iron ore and related raw materials)

5. Foreign environmental protection management has caused the production line to stop production (for example, South Korea has stopped several desiliconization lines due to environmental protection reasons)

6. The growth of new energy vehicles stimulates the price of related raw materials (such as cobalt) to continue to rise

7. The domestic epidemic is effectively controlled, and the economic recovery is superimposed on the country's new infrastructure to stimulate the increase in domestic economic development demand

8. China's new energy application market continues to grow (solar energy, wind power, electric vehicles, etc.)

9. The domestic and international market demand for testing, epidemic prevention, control, and epidemic control products and the growth of demand for housing economy

10. The foreign epidemic has led to an increase in imports of Chinese products and dependence on a certain period of time

11. Some high-end raw materials have been restricted by the export of developed countries such as the United States

12. Unlimited loose stimulus of the US currency, using the dominant position of the US dollar to release water, increasing the risk of inflation, pushing up commodity prices

13. The global supply of new crown vaccines has increased, the epidemic situation in some countries has been gradually brought under control, and the resumption of production has increased the demand for bulk commodities

14. The impact of international political turmoil (such as the continuous turmoil of the military coup in Myanmar affecting the supply of rare earth mines in China)

15. The impact of China's relevant resource policies (such as the release of the “Regulations on Rare Earth Management for Solicitation of Comments” in early 2021)

16. Other relevant factors

In recent years, the decisive factor of the rare earth market mainly depends on the supply side. The two rounds of rare earth's surge in October 2016 and May 2019 were mainly due to the tight supply of rare earths on the policy side. Unlike the past, the rare earth market from March 2020 to the present is mainly due to tight supply and demand, and the increase in demand has also played a role.

The main impact of the substantial increase in raw materials

1. The tightness of raw materials has caused prices to rise sharply, and the market is hoarding. At the same time, copying and speculation are increasing, and some varieties are in short supply, which drives up the production cost of magnetic materials. However, downstream users cannot accept simultaneous price increases in the same proportion. Special time causes companies to produce without raw materials. , The price increase of magnetic material enterprises’ products is limited, which reduces the profit margins of enterprises. Enterprises need to purchase raw materials at high prices in full, but most enterprises have an account period for repayment, which can be as little as one month, as long as 3-6 months, which harms the healthy development of enterprises. .

2. Most companies in the downstream industries have relatively loose choices as users of magnetic materials. In order to reduce costs and occupy the market, downstream end products have limited upward adjustment of prices. When the price of raw materials rises too fast, they can choose from the sidelines. Enterprises pose greater pressure, especially those that produce conventional products.

3. In order to reduce costs and prices, some downstream companies choose to replace relatively inexpensive raw materials and magnetic materials, and some companies even stop using them due to cost and market pressure.

4. If the domestic raw materials of some varieties, such as rare earths, increase too fast, they will continue to stimulate foreign production and balance market supply and demand.

5. The continuous price increase in the upstream will inevitably restrain and affect the demand for downstream applications.

Pay attention to the main factors affecting the price changes of raw materials in the future

1. Uncertain changes in the global epidemic caused by the mutation of the new crown virus

2. Changes in international relations and geopolitics

3. National resource policy and environmental protection

4. Changes in downstream markets

5. Changes in the supply industry chain lead to changes in the application market. For example, the shortage of high-end chips in China and the tight supply of global automotive and mobile phone chips have led to changes in related downstream markets such as automobiles and mobile terminals.

6. Changes in the international supply chain, such as the accelerated cooperation between the United States and Australia in rare earths, and the start of rare earth production in the United States

7. New sources of supply and new market areas

In the future, affected by a variety of comprehensive factors, the price of magnetic material raw materials will still fluctuate at a high level for a certain period of time. Due to the large differences in the supply and demand of various raw materials, some varieties will still maintain an upward trend, but will not continue to rise all the way. It will be adjusted when there is a serious imbalance between market supply and demand and prices, and will be relatively stable in a certain reasonable price range in the future, but due to many influencing factors, uncertainties will increase.

Source from: Magnetic Materials Association

Request a free quote
If you are interested in our products and want to know more details,please leave a message here,we will reply you as soon as we can.
Leave a message
welcome to BearHeart
If you are interested in our products and want to know more details,please leave a message here,we will reply you as soon as we can.