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Market Update: Rare Earth Magnet Prices and Motion Control

POSTED 04/10/2013  | By: Kristin Lewotsky, MCA Contributing Editor

What you need to know about new sources and future prices before you design your next project.

Magnet strength drives the performance of permanent-magnet (PM) servo motors. Rare-earth magnets that incorporate neodymium and dysprosium deliver performance, size, and weight benefits that are so compelling that they dominated the market for a number of years. When global supply issues sent prices surging in 2010, though, OEMs had to step back and rethink their motor decisions. Fortunately, pricing began to stabilize in late 2011. Now, a year and a half later, we spoke with analysts to discover how prices are trending, whether new sources have begun for production, and what engineers need to know before they sit down to design their next system.

Before beginning the discussion, it’s important to note that despite the name, rare-earth elements are not scarce. Their relative abundance is greater than that of precious metals like gold and platinum. They earned their name because they don’t tend to concentrate in deposits, making them difficult to extract and refine. For the purposes of this article, we are interested in neodymium and praseodymium, considered light rare-earth elements (REE), and dysprosium, which is considered a heavy REE. Extracting rare-earth oxides (REOs) requires a multistep process that involves toxic chemicals and generally requires special measures to avoid environmental impact.
Crusher at the Mountain Pass pulverizes rare-earth or before it is sent through the milling and flotation steps, and then down through the chemical separations process. (Courtesy of Molycorp)
In the 1960s, magnet and motor designers began to investigate replacing ferrite magnets with rare-earth magnets based on neodymium. It was a process that took several decades to reach technical maturity. Although neodymium delivered high magnetic flux, it offered poor resistance to demagnetization at high heats—at least until designers began tweaking the alloys with dysprosium to improve thermal performance. Gradually, they achieved the performance they sought, and rare-earth PM motors became the optimal solutions for certain applications.

Meanwhile, even as these improvements were taking place, China entered the rare earth materials market as a supplier. In the 1990s, the market for rare-earth materials was basically stable, supplied by a handful of sites, including California’s Mountain Pass mine. Then, significant deposits of REOs were discovered in southern China and Mongolia. In the case of Mongolia, the REOs were byproducts of iron-ore mining, which made them inherently less expensive. In the south, wildcat operations sprang up. “Particularly in southern China, everyone started digging these materials up and processing them very cheaply,” says Bernie Galing, researcher with SBI Energy. “There were no environmental restrictions so it was pretty much like the wild West.” As the world got flooded with cheaper and cheaper rare earths minerals, it became unprofitable for Mountain Pass and others to continue operating so they shut down, which basically left China as almost the world's sole source of REEs.

From the late 1990s today early part of the last decade, the cost of REOs dropped steadily year-over-year. Rare-earth PM motors were no longer saved for select applications but became the default choice. Almost across the board, consumer and industrial products requiring motors became smaller, lighter, and cheaper. Then, China cut its export quotas, and amid concerns about the supply chain, prices began to rise.

The source of the spike
Although it was widely believed that the bubble was caused by China limiting exports, that was not entirely the case. Although it’s true that Chinese export quotas for REOs underwent a significant decrease beginning in 2008, the key fact is that at no time did exports actually reach those ceilings. In fact, in 2011, exports for those materials totaled less than half of the limit. The real problem was the need for stability. Manufacturers with long term contracts or product life cycles couldn’t risk being unable to get materials. Fear of supply chain problems became a self-fulfilling prophecy. “Even though rare earths went up very steeply, you didn't need a lot of rare earths for PM motor,” says Galing. “The real problem from a manufacturing perspective was that manufacturers felt they couldn’t trust the supply chain. Regardless of the price, they needed the material. I'm not sure many understand that that was the biggest factor [behind the bubble].”

“Right after the announcement in the middle of 2010 that there was going to be this reduction in quota, people were calling to double or triple their orders from various suppliers on a ‘just in case’ basis,” says Gareth Hatch, principal analyst and founder of Technology Metals Research. “Suppliers of these materials just kept pushing the price up because they knew they wouldn't be able to [fill all the orders.] It just became a spiraling mess.” The whole chain of events peaked in the summer of 2011, in part because the quotas for the following year were released and were unchanged. “I think that took the heat out of the craziness,” he adds. “There was a perception that there was at least a little bit of stability to the quota numbers.”

And at the height of the bubble, a funny thing happened. Rare-earth PM motors were no longer no-brainers. OEMs began reviewing their designs, seeking out alternatives where possible. For cases that demanded rare earth materials, manufacturers might trade out from a premium grade magnet to a lower-performance grade that used reduced amounts of dysprosium for a narrower operating temperature range. As demand began to soften, the market correction really took hold. “For most of these materials, prices are about one and a half to two times what they were pre-bubble,” Hatch says. “Actually, when you look at the price drop, you can kind of see that particularly for neodymuim and dysprosium, we’re about where we may well have been had they been no price peak.”

Demand for rare earth magnets has dropped as a result of OEMs searching for alternatives during the bubble. That’s likely to change this year, Hatch thinks, in part due to OEMs reentering the market now that pricing has normalized, and partly due to the non-Chinese competition that has cropped up in the REO market. According to Molycorp, Mountain Pass should finish its ramp up to phase one operations by midsummer, for a run rate of 19,050 metric tons per year of rare earth oxide equivalent (REO). Depending on demand, production could expand to phase two, corresponding to 40,000 metric tons per year.

In Western Australia, Lynas Corp. has the Mount Weld mine up and running. As of December 2012, they had extracted 15,200 dry tons of material, which contained 5,410 ton of REOs. The roadmap calls for phase one to generate 11,000 tons of rare earth materials, some fraction of which will be neodymium and praseodymium. Long term, they hope to double that number. “Between those two, 2013 is probably the year where we will really start to get a substantial amount of neodymium and praseodymium from sources outside of China,” says Hatch.

Dysprosium is a bigger challenge. The element is essential to high-performance PM motors. A small amount of dysprosium added to the alloy helps magnets resist demagnetization, but the element is expensive, far more so than neodymium. According to Hatch, alternative sources will not be on line for several more years.

One solution is to cut the percentage of dysprosium in the magnet. The approach reduces cost, although it also modifies the operating temperature range of the motor. Other options include alternative compositions, such as the lanthanum- and cerium-containing powders from Molycorp’s Magnequench unit, which are designed for use in bonded magnets. Magnequench also makes non-sintered MQ2 magnets that are dysprosium free and stable up to 200°C. Aichi Steel Corp. has developed an anisotropic neodymium-iron-boron powder that exploits aligned magnetic domains to produce bonded magnets able to tolerate temperatures as high as 150°C.

Looking forward
As difficult as the whole experience was, ultimately it pushed designers to be better engineers. The lessons learned about alternative motor technologies and magnet grades can be leveraged to optimize future projects in the absence of the extreme price pressures. Meanwhile, with new sources coming online and a better informed user base, the consensus seems to be that the market will remain rational, although prices are unlikely to drop completely back to their earlier levels. In China, for example, environmental regulations have tightened up, which adds to production cost, preventing the aggressive pricing used against competitors in the past.

The bottom line is that it’s safe to go back to rare-earth PM motors, so long as designers bear in mind everything they learned during the bubble. “We're well out of the danger zone as far as the pricing,” says Hatch. “Folks are asking themselves is it safe to come out of the bunker? Can I go back to using these materials or is this going to happen again? I don't think it will.”