Rare-earth Neodymium (NdFeB): An eye on sourcing and pricing

The use of rare-earth materials as a key component in permanent magnet generators (PMG) has raised concern around the world. China now controls approximately 97% of the rare-earth materials that are vital to clean-energy technology sources according to the U.S. Government Accountability Office. What will this do to the future supply of rare-earth materials used in PMGs? And how will China’s monopoly affect global pricing?

The real meaning of “rare”

Although the term “rare-earth” has been selected to call a collection of 17 chemical elements in the periodic table, luckily they are relatively plentiful. In some cases, these “rare” metals are nearly as abundant as tin or lead. The reason they are determined to be “rare” results from their geochemical properties, making them rare to find in concentrated or easily exploitable forms.

“Rare-earth” magnets, then, are permanent magnets made from alloys of rare-earth elements. They were developed in the 1970s and 80s and are known to be the strongest form of permanent magnets today. They allow for relatively high temperatures and high remanence flux, both of which are essential properties for reliable wind turbine operation.

Numerous global conglomerates have been using rare-earth magnets in their applications for decades. Companies like the Japanese powerhouses TDK and Hitachi have employed them for use in their popular products such as automotive, home appliances, medical, information and communication, as well as industrial, including wind power generation.

The concern is not the fact that rare-earth materials are being used. Instead, it’s a question of how much the application requires. Traditional markets, such as disc drives, personal electronic devices and power tools require a few grams per unit. Hybrid and electric vehicles are growing rapidly in popularity. These, too, only require rare-earth materials in volumes of kilograms. PMG-based wind turbines, and in particular direct-drive generators, devour a whopping metric ton per unit. In other words, every one direct-drive generator uses about as much rare-earth magnets as 3,000 clean-energy vehicles. And this is where the questions start.

Getting the full picture of China’s monopoly

Although China today has nearly a monopoly on the mining of rare-earth materials, it is estimated that the country accounts for only 35-40% of the world’s total rare-earth reserves. Until now, the mining of these rare-earth materials in many other parts of the world has not been economically viable.

Now with the demand for these materials rising exponentially, so too has China’s grip on their availability. This has taken the rest of the world by surprise, especially when the need for rare-earth materials is increasing quickly to match tightening global legislation for Clean Energy. Suddenly, reopening mining operations in other parts of the world are becoming commercially lucrative.

Two of the mines that are due to come back on-stream at peak production capacity already in 2012 are Molycorp’s California-based mine and the Lynas mine in Australia. Mines that are planning to start up in the near future are in Canada, South Africa and Kazakhstan. Plus, known resources of Neodymium exist in Vietnam and India.

Pricing sensitivities

With scarcity, come higher prices. This has been seen, too, in China as the country seeks to capitalize on its unique position. The price has jumped from just under USD 30 per kilo in November 2009 to now over USD 100 per kilo a year later for an increase of over 200%, which is reflected in an increased 5-10% rise in PMGs.

China also imposed an aggressive taxation policy that ranges from the highest percentage for exporting the pure rare-earth materials to a medium tax percentage for rare-earth materials that have undergone one refinement process within the country before exporting.

“As The Switch manufactures machines within the country with rare-earth magnets, or exports ready-made magnets, taxation rates vary from 0% to a very low tax percentage. So, in effect, the company has been able to avoid any of the more aggressive forms for taxation,” Panu explains.

The reopening of mines, however, will have a positive effect on bringing the prices back under control with a healthier demand-and-supply scenario.

Therefore, The Switch has made the supply of rare-earth materials a strategic priority. “We have secured the necessary supply to match our growing needs by buying only completely finished magnets from China,” says Panu. “We have established a good working relationship for high-quality deliveries from several Chinese magnet suppliers. Additionally, we have combined our sourcing power with Dongfang Electrical Machinery (DFEM), a large state-owned enterprise, to be assured of good service, competitive pricing and continuous access to Neodymium.”

“An area where we are making all efforts is to ensure that our suppliers are complying with stringent environmental regulation. This has been unquestionably an area of concern earlier. For The Switch, our approach is to build in quality and environmental sustainability into all of our products throughout their entire life cycle. And we require our partners to do the same,” Panu states.

Being part of REITA

The Switch is also an active member of REITA, the Rare Earth Industry and Technology Association, which monitors and promotes rare-earth mining activities outside China. “The increased availability of all kinds of rare-earth materials is an important and positive development,” Panu comments. “And in the long run, it’s probably not in the interest of China to solely take care of the global rare-earth material supply, which may just act to accelerate a changeover to other options or drive research to find new technologies.”

As part of REITA, The Switch is part of a global collaboration team that supports all kinds of green energy initiatives. The group shares knowledge, information and builds relationships among its members when it comes to using and refining rare-earth materials. In addition, REITA takes an active approach to create standards of excellence for environmental stewardship.

Advantages and future developments in permanent magnets

Significant expansion is being forecasted for the use of rare-earth materials in green energy applications precisely because of their favorable results. Advantages specific to using rare-earth magnets in The Switch PMGs include considerably reduced stator magnetization and reduced copper losses for better reliability, synchronous speed that requires no speed measurement, no laminated rotor necessary and no coils, slip rings or commutator in the rotor, thereby reducing maintenance needs.

“We’re obviously also looking into the recycling possibilities of rare-earth magnets and also for new sources as we further enhance our PMGs,” says Panu.

The main thrust in development today is to increase the strength of the magnetism and resistance to demagnetization. Additionally, new versions are being created that will resist even higher temperatures.

With the critical role of rare-earth magnets in the development of clean-technology, The Switch is forging ahead with ways to secure sustainability with rare-earth materials for a brighter future with New Energy.

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Rare-earth Neodymium (NdFeB): An eye on sourcing and pricing