How High Rare-Earth Prices Can Be Magnetic
China is trying to make itself magnetic to industrial consumers of rare-earth elements, and it may attract a key customer.
Beijing produces the vast majority of rare earths – shorthand for 17 metals crucial for making everything from glass to laptop batteries – giving it virtual control of the business. The country’s footprint in rare earths is so large that its export policies – in particular quotas – could be soon challenged by Washington at the World Trade Organization depending on the outcome of a similar trade case due to conclude by early December.
But China has also expressed discomfort at being just a miner of the minerals, not a manufacturer of the high-tech products they go into. Analysts say China’s policy over the past year to be stingy with rare-earth exports reflects its ambitions as a developer of high technology, not only the environmental concerns that Beijing typically cites.
Now, Beijing may pull in a key maker of components for wind turbines, hybrid cars and miniature electronics: Hitachi Ltd. The Japanese company is considering production of some high-grade magnets in China, among many options, said one executive. “Generally speaking, it’s wise for a company’s management to keep all options open,” the executive said.
The permanent magnets Hitachi makes reduce an assembly’s weight but don’t sacrifice its power, which is important on huge wind towers and miniature electronics.
Just a year ago, China was frightening Japanese industry because Japanese companies are the largest importers of rare earths and Beijing was pinching supplies. Hitachi wouldn’t be the first Japanese company to commit in China. In July, Showa Denko K.K. said it would significantly boost its production in China.
Growing expectations Hitachi will step into China follow news in August that it won’t go ahead with plans to build a magnet-making facility in the U.S. in partnership with Colorado-based Molycorp Inc.
The U.S. company says the timing is coincidental. “Hitachi told us they were planning to create or build a new operation in China but that they were also going to build a magnet facility in the U.S.,” Molycorp CEO Mark Smith said in a telephone interview earlier this month. “They are going to locate their facilities where the feed stocks are.”
(Mr. Smith said Molycorp is speaking with at least three other companies about cooperating on a magnet venture that will compliment the mine it is developing near Las Vegas. Any deal, he noted, would require licensing some Hitachi technology.)
All of this puts context around an unusual announcement last week from China’s largest producer of rare earths that would support prices of a particular blend of the elements, one used by magnet makers.
Amid signs rare earth prices were sliding, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. said it would pay 900,000 yuan per metric ton for a praseodymium-neodymium oxide mixture, roughly 6% over the market price. The oxide prices rose. While it might appear counterproductive to entice customers by advertising higher costs, developments in the rare-earth industry are rarely as simple as they appear.
The Chinese company, which is the world’s largest rare-earths producer by output, offered only a broad explanation for its price-support plan. Baotou said the purchase plan was “in order to implement the State Council’s guideline prompting a healthy development of the rare earth industry,” including protecting resources, stabilizing the market, reducing price fluctuations and “integrating” the price and value of rare earths.
Yet it didn’t pledge to underpin all rare earth prices. Instead it is targeting the mixture – also known as didymium – that is crucial in making magnets. One possible explanation, analysts say, is didymium’s emerging role as a price benchmark.
But another is that the move is an effort to build a stronger supply chain of materials–in other words, to encourage Chinese rare-earth processers to enhance their ability to serve high-technology companies like Hitachi with the compounds they need. Making didymium isn’t simple and, the thinking goes, the better China’s capabilities become the more easily it will be to offer the kind of mine-to-magnets strategy that, for instance, Molycorp pledges.
Molycorp too has been stepping up its own production of didymium this year, according to its regulatory filing that show it is producing from stockpiled materials before the California mine reopens. Also, when Molycorp announced the collapse of talks over the magnet facility with Hitachi last month, it unveiled a three-year plan to supply the Japanese company with rare earth materials including didymium.
–By James T. Areddy; Follow him on Twitter @jamestareddy
Beijing produces the vast majority of rare earths – shorthand for 17 metals crucial for making everything from glass to laptop batteries – giving it virtual control of the business. The country’s footprint in rare earths is so large that its export policies – in particular quotas – could be soon challenged by Washington at the World Trade Organization depending on the outcome of a similar trade case due to conclude by early December.
But China has also expressed discomfort at being just a miner of the minerals, not a manufacturer of the high-tech products they go into. Analysts say China’s policy over the past year to be stingy with rare-earth exports reflects its ambitions as a developer of high technology, not only the environmental concerns that Beijing typically cites.
Now, Beijing may pull in a key maker of components for wind turbines, hybrid cars and miniature electronics: Hitachi Ltd. The Japanese company is considering production of some high-grade magnets in China, among many options, said one executive. “Generally speaking, it’s wise for a company’s management to keep all options open,” the executive said.
The permanent magnets Hitachi makes reduce an assembly’s weight but don’t sacrifice its power, which is important on huge wind towers and miniature electronics.
Just a year ago, China was frightening Japanese industry because Japanese companies are the largest importers of rare earths and Beijing was pinching supplies. Hitachi wouldn’t be the first Japanese company to commit in China. In July, Showa Denko K.K. said it would significantly boost its production in China.
Growing expectations Hitachi will step into China follow news in August that it won’t go ahead with plans to build a magnet-making facility in the U.S. in partnership with Colorado-based Molycorp Inc.
The U.S. company says the timing is coincidental. “Hitachi told us they were planning to create or build a new operation in China but that they were also going to build a magnet facility in the U.S.,” Molycorp CEO Mark Smith said in a telephone interview earlier this month. “They are going to locate their facilities where the feed stocks are.”
(Mr. Smith said Molycorp is speaking with at least three other companies about cooperating on a magnet venture that will compliment the mine it is developing near Las Vegas. Any deal, he noted, would require licensing some Hitachi technology.)
All of this puts context around an unusual announcement last week from China’s largest producer of rare earths that would support prices of a particular blend of the elements, one used by magnet makers.
Amid signs rare earth prices were sliding, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. said it would pay 900,000 yuan per metric ton for a praseodymium-neodymium oxide mixture, roughly 6% over the market price. The oxide prices rose. While it might appear counterproductive to entice customers by advertising higher costs, developments in the rare-earth industry are rarely as simple as they appear.
The Chinese company, which is the world’s largest rare-earths producer by output, offered only a broad explanation for its price-support plan. Baotou said the purchase plan was “in order to implement the State Council’s guideline prompting a healthy development of the rare earth industry,” including protecting resources, stabilizing the market, reducing price fluctuations and “integrating” the price and value of rare earths.
Yet it didn’t pledge to underpin all rare earth prices. Instead it is targeting the mixture – also known as didymium – that is crucial in making magnets. One possible explanation, analysts say, is didymium’s emerging role as a price benchmark.
But another is that the move is an effort to build a stronger supply chain of materials–in other words, to encourage Chinese rare-earth processers to enhance their ability to serve high-technology companies like Hitachi with the compounds they need. Making didymium isn’t simple and, the thinking goes, the better China’s capabilities become the more easily it will be to offer the kind of mine-to-magnets strategy that, for instance, Molycorp pledges.
Molycorp too has been stepping up its own production of didymium this year, according to its regulatory filing that show it is producing from stockpiled materials before the California mine reopens. Also, when Molycorp announced the collapse of talks over the magnet facility with Hitachi last month, it unveiled a three-year plan to supply the Japanese company with rare earth materials including didymium.
–By James T. Areddy; Follow him on Twitter @jamestareddy
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