Panel DiscussionMagnetics 2016

Jacksonville, Florida

January 22, 2016

“What’s in Store for theGlobal Magnet Industry?”

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Panelists

• Walt Benecki, Moderator, President,Walter T. Benecki LLC

• Dr. John Ormerod, Sr. TechnologyAdvisor, Magnet Applications Inc.

• Steve Constantinides, Director ofTechnology, Arnold Magnetic TechnologiesInc.

• Yutaka Yoshida, Sr. Mgr., Tech. Support atDaido Steel America

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Discussion Outline

• Brief introduction of participants

• 5-6 key questions about the future ofthe permanent magnet industry

• Questions from the audience

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Walter T. Benecki LLCThe Consultancy Confidentially

Serving the Global Magnet Industry

Strategic Planning - Benchmarking - Acquisitions -Joint Ventures - Dispositions - Pricing Strategy -

Technology Assessments – Business Planning

3720 S. Ocean Blvd., Suite 702Highland Beach, FL 33487

Phone: (847) 624-1170Email: waltbenecki@aol.com

Web Site: www.waltbenecki.com

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Walter T. Benecki LLCNew Consultancy Model – Effective April 2016

• Comprehensive Bi-Monthly Newsletter

• Timely Email News Alerts

• Unlimited Confidential Telephone orEmail Consultation

• Two Complimentary Copies of “The GlobalPermanent Magnet Industry”

• Advance Copies of all presentations andpublished articles

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Magnet Applications, Inc.

• Visit the website at: http://magnetapplications.com• A Bunting Magnetics Company:

https://buntingmagnetics.com/• Largest North American manufacturer of compression

bonded NdFeB and injection molded ferrite andNdFeB magnets.

• Supply full range of engineered magnets andmagnetic assemblies.

• Located in DuBois, PA – Originally established in UKover 50 years ago – sister company located inBerkhamsted, UK..

• Primary applications are BLDC motors and sensors inthe automotive, medical and industrial markets.

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Magnet Applications, Inc.

• Pre-production magnetic design services including 3Dmagnetic modeling

• Industry leading technical services to optimize thematerial for the application

• Investing in R & D for next generation of magneticmaterials

• The backing of strong family ownership – in business forover 55 years

• ITAR / DFARS registered for Defense Industry• ISO-9001 Certified Quality System with continuous

improvement• Very strong international supply chain for the complete

range of permanent magnet materials

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What Arnold does…

Precision ThinMetals

• Magnetic and non-magnetic metals &Alloys from 1.75microns

• Sheets, Strips, &Coils

• Milling, Annealing,Coating, Slitting

• ARNON® MotorLaminationMaterial

MagneticAssemblies

• PrecisionComponentAssembly

• Tooling,Machining,Cutting, Grinding

• Rotor Balancing• Sleeving

MagnetProduction &

Fabrication

• Rare EarthSamarium Cobalt(RECOMA®)

• Alnico, cast &sintered

• Injection molded• Flexible magnets

UltrahighPerformance

Motors

• Smaller, fastermotors

• Power densepackage

• High RPM magnetcontainment

• >200°C Operation

Performance materials enabling energy efficiency

Engineering | Consulting | TestingStabilization & Calibration | Distribution

www.arnoldmagnetics .com 8

Broad market base & global presence

www.arnoldmagnetics .com

Automotive 10%

Advertising& Promotional

Energy

Consumer& Appliance

Medical

ReprographicSystems

Industrial

10%

5%

Aerospace& Defense

15%

10%

20%

15%

15% Facilities, Engineering,Sourcing & Support

– North America ~50% of Revenue

– Europe ~30% of Revenue

– Asia Pacific ~20% of Revenue

Low cost regionmanufacturing since 1995

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Est. 1990, Nakatsugawa, JapanNEOQUENCH-P, NITROQUENCH-P,NEOQUENCH-DR magnets & appliedproducts

Est. 1994, Ayuthaya, ThailandNEOQUENCH-P magnets for hard disk drivespindle motors, also NEOQUENCH-DR

Est. 2003, Suzhou, ChinaNEOQUENCH-DR magnets for EPS andservo motors

Est. 2002, Shenzhen, ChinaNEOQUENCH-P magnets for sensors andsmall motors

Daido Electronics(Suzhou) Co., Ltd.

Daido Steel Co., Ltd.

Daido ElectronicsCo., Ltd.

Daido Electronics(Thailand) Co., Ltd.

Daido Electronics(Shenzhen) Co., Ltd.

Magnet R & D

Est. 1916, Nagoya/Tokyo, JapanSpecialty steels, forgings, powders,automotive components, andelectronic/industrial materials

Est. 2011, Nakatsugawa, JapanPLP (Press-less Process) NdFeB sinteredmagnets

Intermetallics Japan

Daido Steel (America) Inc.Est. 1983, Schaumburg, IL, USA, Sales/technical support

Daido Electronics Europe OfficeEst. 2015, Frankfurt, GermanySales/technical support

Yutaka Yoshida, Sr. Manager, Technical Support

MMAGNETICS 2016 Jan. 21-22, Jacksonville, FL

M Keynote Panel – Daido Electronics

Daido Steel Group Magnet Business

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Daido Steel Group Magnet Business

• NEOQUENCH-PIsotropic Polymer-bonded NdFeB (MQ1)

- Injection-molded: 4 - 9 MGOe- Compression-molded: 7 - 12 MGOe

• NEOQUENCH-DRHot-extruded, radially-oriented NdFeB (MQ3):

31 - 43 MGOe• NITROQUENCH-P

Isotropic Polymer-bonded SmFeN:14 MGOe

• PLP seriesPress-less Process Sintered NdFeB:

38 - 50 MGOe

MMAGNETICS 2016 Jan. 21-22, Jacksonville, FL

M Keynote Panel – Daido Electronics

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Not to put too much pressure onour esteemed panel….

• But here are a few predictions made 90 years ago:

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Question #1

• We know that the magnet industry is facingconsiderable unknowns regarding the currentlegal battle between Hitachi and theconsortium of Chinese manufacturers.

• We’re scheduled to hear the US PatentOffice’s “Decision” very shortly.

• Is there anything positive here we can lookforward to?

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Recent Rare Earth RawMaterial Price Trends

(Not much of a trend)

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Permanent Magnets SignificantlyInfluence The Global RE Industry

(Quotes from Argus Consulting Services – Jan 2016 Webinar)

• Rare earth prices have steadily trended downwardsince 2011.

• Permanent Magnets account for about 20% ofglobal REO tonnage, but 60% of the total dollars.

• Magnet demand is forecasted to increase 3-4% inthe next few years.

• Chinese policies will continue to materially impactREO prices.

• The outlook (for REO prices) is “uncertain”.

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Permanent Magnets SignificantlyInfluence The Global RE Industry

(Quotes from Global Rare Earth Metals Market 2015-2019 Report – Jan 2016)

• Analysts predict the rare earth metals market to grow at arate of 14% during the forecast period.

• Primary growth drivers will be use of rare earth metals inthe wind energy sector (magnets!) and NiMH batteries.

• Despite a broad scope of application and a growingdemand, the supply of these elements (REO’s) isgeographically concentrated with the dominance of a fewcountries.

• (The) expansion in the (REO) supplier base will drasticallychange the supplier landscape and is expected to lead to asoftening of prices going forward.

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The REO Outlook is Muddled

• Molycorp is reportedly “Going up for auction” in March.

• Lynas continues on with gradual progress.

• Projections for future REO demand vary quite a bit.

• The Magnet Industry is certainly a significant consumerof Rare Earths.

• It appears that China will continue to dominate theglobal production (and prices) of rare earth materials.

• Chinese government policies are like “shifting sands”.

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Question #2

• Molycorp is reportedly “Going up for auction” in March.

• Lynas continues with challenges, but is hanging in there.

• Projections for future REO growth vary quite a bit.

• The Magnet Industry is a significant consumer of RareEarths.

• It appears that China will continue to dominate theglobal production (and prices) of rare earth materials.

• Chinese government policies are like “shifting sands”.

• How can anyone plan for future price trends?

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New Technology Investments

• Arpa-E, DARPA and EUREFREE have recentlyspent many millions of dollars searching for a“breakthrough magnet material” containingno rare earths. But…..not much to report atthis point!

• Most “new” magnet product development byindustry over the past 5-7 years could best bedescribed as “incremental”.

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Question #3

• Siemens was recently (in 2015) awarded a USPatent covering MnBi permanent magnettechnology

• Niron Magnetics continues to pursue Fe16N2magnets with the University of Minnesota

• Is there any reason to expect a trulysignificant technology breakthrough in thenext few years?

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Question #4

• The Chinese magnet industry is reportedlysuffering from severe over-capacity. Thisappears to be good for buyers and bad forsellers.

• Is there a chance for any significantconsolidation within the Chinese magnetindustry? What about Europe or NorthAmerica?

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Question #5

• A number of companies are currentlyattempting to recycle rare earth magnets(e.g., from disk drives and PM motors)

• Is there any reasonable chance suchinitiatives will prove to be economicallyviable?

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Question #6• Finally, what are the applications that could

potentially accelerate future demand forpermanent magnets? A few candidates:

– Wind turbines– Electric vehicles– Magnetic refrigeration– Advanced consumer electronics– Energy efficient PM motors– Energy storage systems– Additive manufacturing– Something not on today’s radar screen

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Questions fromthe Audience

Thank you for yourparticipation!

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