ferrite magnets
Relevant analysis and countermeasures on the skyrocketing price of rare earths
Sep 28,2021.

The Chinese Society of Rare Earths recently visited rare earth application companies, mainly key NdFeB factories, to investigate the production and operation of each unit. Companies generally report that with the state’s policy support for corporate innovation, due to the importance of high-tech development opportunities and the benefits brought by the dual-carbon strategy, the rare earth permanent magnet industry has generally ushered in a new round of prosperity in recent years. Market demand has grown steadily, and both production and sales have been booming.

rare earth magnets china manufacturer

At the same time, companies also expressed great concern about the current unfavorable factors, especially the soaring price of raw materials such as praseodymium and neodymium. Since the beginning of this year, the price of metals such as praseodymium and neodymium has been like a wild horse. From 327,000 yuan/t in October last year, it has soared to 740,000 yuan/t recently. For cobalt, which is also in short supply, the highest price from 2019 to now is only 390,000/t. (The abundance of cobalt is 25 and the abundance of neodymium is 41.5).

Under this unbearable pattern of raw material supply, the following dilemmas have appeared: First, the production cost has risen sharply, and the efficiency of permanent magnet companies has decreased significantly or suffered serious losses, which has reduced local taxes and employment, and some companies are unsustainable; second, raw material procurement Difficulties, due to insufficient supply to further increase prices; third, companies cannot sign long-term orders; long-term orders that have already been signed have brought multiple leading companies due to the price difference (that is, the difference between the low price of raw materials at the time of signing and the high price of raw materials purchased) Hundreds of millions of real and potential losses have come; fourth, the consequent increase in the price of rare earth permanent magnet companies, is gradually transmitted to terminal application companies such as motors, increasing the operating difficulties of these companies; fifth, there are widespread accounts in the rare earth permanent magnet industry. The longer period, coupled with the high price of raw materials, has sharply increased the capital risk. These factors are very likely to lead to the reversal of the good situation of rare earth applications represented by rare earth permanent magnets.

The above is a relatively intuitive negative effect on the business activities of the company. It will also have the following impacts on the rare earth permanent magnet industry and related downstream enterprises and the entire industry chain, as well as the high-tech industries involving rare earths.

1. Rare-earth raw material manufacturers have made huge profits, but this situation is unsustainable and does not conform to economic laws. The historical experience of various industries has proved this.

The high price forces downstream companies represented by rare earth motors to partly abandon the use of rare earth permanent magnet materials and related technical solutions, and return to ferrite and other materials. For example, permanent magnet direct-drive motors for wind turbines return to asynchronous motors and air-conditioning motors return to use. Silicon steel sheet. In 2011, Gree Electric and many air-conditioning manufacturers, when they were just preparing to adopt a large number of rare earth permanent magnet motors, faced a sudden increase in the cost of hundreds of yuan per motor, and had to reluctantly give up. This passive situation is likely to repeat in the future.

2. Rare earth upstream companies have indeed gained temporary benefits due to price increases, but this is based on the sharply reduced and unbearable benefits of downstream companies. In addition to being unsustainable, it also contributes to energy conservation and emission reduction, especially the implementation of dual carbon. The strategy is very unfavorable, because rare earth permanent magnet materials are used in large quantities to produce high-efficiency energy-saving motors, which can save electricity by 5-20% or even higher. Energy-saving and emission-reduction are sacrificed due to the abandonment of energy-saving products. Upstream companies have indeed gained benefits, but in the long run they may not be able to compare with the environmental benefits and carbon emission reduction effects brought by downstream applications.

3. The upstream, middle and downstream companies of rare earths are a community of shared interests. The high raw material prices of upstream companies will sooner or later make downstream companies unbearable. Production reductions may become inevitable, replacement or helpless. Eventually, there will be sluggish downstream demand and shrinkage of downstream industries, and then reverse transmission, causing the price of upstream products and output and benefits to both decline. Sooner or later, the damage to the downstream industry will turn into the damage to the upstream industry itself.

4. Maintaining and protecting the sustainable development of the entire industry chain of rare earths is the social responsibility and social responsibility of upstream enterprises, especially the six major groups. The socialist market economy should be based on honesty and win-win. A healthy upstream, midstream, and downstream industrial chain should be a community of mutual benefit and complementary interests. Everyone who has money should make a profit. The profits must be distributed reasonably in all links of the industrial chain. This is the essence of the healthy development of the entire industrial chain and the large and medium-sized enterprise community, which violates the sharing of interests. Sooner or later, the principle will have to pay a price, and it is also unsustainable.

5. The skyrocketing price of rare earths will surely stimulate the development of overseas rare earth resources and weaken the international influence and dominance of my country's rare earth industry. The skyrocketing price is mainly manifested in the doubling of the price of neodymium praseodymium oxide, which accounts for an average of 20% of production, to 600,000 to 650,000/ton, which is far higher than the production cost. According to analysis, the production cost of praseodymium and neodymium oxide at the Malaysian rare earth plant of Lynas, Australia, the largest overseas rare earth company, is about 260,000 yuan/ton, and the average sales price in fiscal year 2020 is 320,000 yuan/ton, which is on par with Chinese enterprises. The US MP company plans to resume rare earth separation production in 2023, and the high price has laid the market foundation for its return to the rare earth field. The shortage of rare earths and skyrocketing prices will also generate more import smuggling.

The reasons for the skyrocketing price can be briefly described as follows:

1. The long-term low price has accumulated the driving force to supplement the increase.

2. The collateral impact of the rise in international and domestic bulk production materials.

3. The two indicators for total control of rare earth minerals and smelted products are seriously insufficient. For example, the total indicator last year was 140,000 tons and the demand was 240,000 tons. This contradiction has existed for many years and has not been resolved.

4. Rigid demand represented by wind power, new energy vehicles, industrial motors, etc. is strong and has a significant growth rate, which has a large market space.

5. The rare earth price formation mechanism and the self-discipline of rare earth raw materials enterprises need to be improved and lack of effective operation, and lack of due attention and actions to the skyrocketing prices.

6. Enterprises still have high expectations for continued price increases, and they have the mentality of reluctant to sell or hoard.

At the same time, it does not rule out the existence of certain speculation.

The existence and superposition of the above factors have multiplied effects, resulting in a relatively strong price increase.

In order to solve the negative impact caused by the skyrocketing price of rare earths, the following countermeasures are proposed.

1. In view of the strong rigid demand for rare earth raw materials, it is advisable to increase the supply on the supply side, that is, to increase two total volume control indicators. The two total control indicators of rare earth mineral products and smelting separation products have been low for many years, and the gap is large compared with actual demand. Attention should be paid to the fundamental role of the market in the allocation of resources, whether incremental increases can be made to fill the gap, and the annual growth rate of downstream industry demand should increase accordingly.

2. Neodymium praseodymium accounts for about one-fifth of the light rare earths, and cerium accounts for half, so resource security and organization of production are not a problem at all. It is recommended that the total amount of light rare earth control indicators should be cancelled at an appropriate time, and the rare earth smelting and separation capacity should be appropriately increased, so as to solve the problem of short supply from the source, which will help reduce the driving force of price increases.

3. In recent years, the supply of medium and heavy rare earths has become more tight and has a greater dependence on foreign resources. It is suggested that under the premise of ensuring environmental protection, the mining of some medium and heavy rare earth mines in the south should be gradually resumed.

4. Give play to the role of social organizations and promote enterprise self-discipline and price coordination. Key enterprises take the initiative to take effective measures to stabilize prices, and establish a rare earth industry chain price cooperation mechanism based on the above-mentioned downstream enterprise price joint meeting system, so as to provide downstream enterprises with a better room for survival and development.

5. Give full play to the role of the State Reserve in stabilizing excessively high prices, and put the urgently needed rare earth raw materials at appropriate times.

6. Import of raw materials such as praseodymium, neodymium, dysprosium, terbium, etc., which are in short supply, is a double-edged sword. Although it has solved the urgent need, it has given up the market to foreign countries, which is not good for domestic upstream enterprises.

7. Lower the resource tax on rare earth minerals, provide reasonable prices of minerals for rare earth smelting and separation enterprises, and reduce the survival pressure of rare earth raw material enterprises.

In summary, we must attach great importance to the various adverse effects brought about by the skyrocketing prices of rare earth raw materials, and adopt effective measures to curb the continued upward momentum. The soaring rare earth prices in 2011 and the subsequent adverse effects caused are enough to cause us to think deeply. Rare earth is a small industry, but there is a big market for applications. The best state of rare earth development should be the formation of a benefit-sharing and risk-sharing community of interests in the upper and middle reaches of the industry chain, making concerted efforts for energy conservation and emission reduction, implementing the dual-carbon strategy, and obtaining greater ecological and environmental benefits, and seeking common development.

Source: China Rare Earth Society

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