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Dependence on unreliable Chinesesources for critical rare earth magnetmaterials puts the U.S. militaryequipment and electronics industryat risk.

Peter C. DentElectron Energy CorporationLandisville, Pennsylvania

oday, nearly 100% of the worlds rare earthmetals and over 94% of rare earth oxides comefrom China. This dominance has become un-mistakable during the past decade, and hasbeen accompanied by a steep decline in U.S.

production capabilities. It is most notable in theNdFeB (neodymium-iron-boron) market, for whichthere is currently no domestic production. Chinesedominance is further demonstrated by its produc-tion of over 85% of hard ferrite and 65% of Alnicoand SmCo (samarium cobalt) magnet materials.These facts are significant because magnet ma-terials are the backbone of manufacturing technolo-gies that support U.S. energy and defense markets.

The loss of production capabilities has also re-sulted in a brain drain of engineers with permanentmagnet materials capabilities. In a recent article en-

titled Offshoring Technology Innovation: ACaseStudy of Rare-Earth Technology, by Fifare, Veloso,and Davidson in theJournal of Operations Manage-ment, (Vol. 26, 2008), the authors described the cur-rent situation. They showed that after the domesticbonded NdFeB magnet industry went to China, in-novation by U.S. industry dropped dramatically.The drop was measured by the drop in the numberof patents involving bonded NdFeB magnets.

Chinese President Jiang Zemin stated in 1999 thatChina must improve the development and appli-cations of rare earths and change the resource ad-vantage into economic superiority. China has ac-

complished this aim through hard work, improvingtechnologies and manufacturing, and low laborcosts and practices.

For example, intellectual property rights abusesin China resulted in a series of lawsuits in 2003 and2004 by the two key worldwide patent holderswho have cross-licensed over 600 patents in NdFeBtechnologies.

Magnequench, a North American company withChinese operations; and Sumitomo (now Hitachimetals), a Japanese firm with Japanese operations,fought non-licensed Chinese NdFeB sales by suingmagnet users such as Walmart, Dell Computer, and

others based on U.S. product sales a rather up-side-down way to enforce IP abuses in China. Atthe present time, there are nine Chinese licensees

and sublicensees to these master patents, according

to the Hitachi Metals website. However, as manyas one hundred companies in China could be pro-ducing NdFeB magnets. This is in stark contrast tothe total lack of NdFeB manufacturing in the UnitedStates.

Rising pricesOn July 14, 2005, Chinese rare earth oxide pro-

ducers agreed on production caps, which began asignificant trend of reduction in tonnages on theworldwide market. The producers agreed, poten-tially in violation of the World Trade Organization(WTO), that if producers sold at less than agreed-

upon prices, fines could be levied of roughly $100per metric ton. However, after prices of elementssuch as neodymium metal rose by a factor of four

T

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HIGH PERFORMANCE MAGNET MATERIALS:

RISKY SUPPLY CHAIN

United States Navy ships, such as the USS New York shown here, need rare earthmagnets for the proper function of innumerable electronic devices.

Fig. 1 Global supply, demand, trends, and forecast of permanent magnetmaterials. In terms of dollars, demand for NdFeB will continue to grow through therecession. Ferrite demand will slacken because the automotive industry is its

primary market. AlNiCo and SmCo are limited to applications in niche markets.Source: WebMagnetics.com

1985 1990 1995 2000 2005 2010 2015 2020Year

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.S.

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SmCo

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in a period of eighteen months after this meetingdate, rare earth metal buybacks from Chinese cus-tomers were mandated at sub-market levels.

In addition, rare earth export quotas were estab-

lished. These continue today, along with reportsthat they are traded or sold among producers.China has not justified its export quotas. On Jan-uary 1, 2008, China increased its export duties from10% to 25% on all rare earth metals. Export dutieswere allowed on some commodities in its protocolof accession to the WTO; however, they did not in-clude rare earth elements used in magnet manu-facturing. One Australian report now projects thatChina may consume all the rare earths it producesby the year 2012.

In addition, recycling of rare earths in China iseffectively non-existent. Large Chinese magnet pro-

ducers do not press parts to near net shape, as iscommon practice in the rest of the world. Instead,the common practice is to produce large blocks,which require significant amounts of material tobe machined away. As a result, much more materialis scrapped than in other countries.

These Chinese actions add to export prices forrare earths, and place non-Chinese magnet pro-ducers at a structural, competitive disadvantage.These actions also result in significant uncertaintyabout prices and availability. China views down-stream user implications of the rare earth price in-creases as having positive effects, such as reduced

competition among Chinese magnet companies,and higher prices for Chinas products. This is ex-actly where the rest of the worlds rare earthmagnet producers have been moving. It is also con-ceivable that future access to rare earth materialsfrom China may be dependent on an agreementto move upstream manufacturing processes intoChina.

On April 21, 2008, the U.S. Department of Com-merce announced dumping of flexible ferrite mag-nets and imposed a duty of 185.3% on Chineseimports.

On June 24, 2009, The Wall Street Journal reportedthat The U.S. and the European Union filed sepa-rate complaints with the World Trade Organiza-tion on Tuesday alleging that China is unfairly ben-efiting domestic industries by restricting exportsof certain raw materials.

U.S. Trade Representative Ron Kirk calledChinas alleged export restraints on raw materialsa giant thumb on the scale in favor of Chinaschemicals, steel, and aluminum industries, amongothers. The U.S. alleges that by limiting exports

on those products through quotas, export duties,licensing, and other restraints, China gives an un-fair leg up to its manufacturers that use those ma-terials. The raw materials involved in the disputeinclude bauxite, coke, magnesium, manganese, sil-icon metal, and zinc. China is a top producer ofthese materials. (Rare earths were not addressedin this action.)

U.S. magnetic materials industryBoth SmCo and NdFeB magnet materials were

invented in the United States. SmCo was discov-ered by Dr. Karl Strnat in the late 1960s while con-

ducting research at the U.S. Air Force Research Labat Wright Patterson AFB. NdFeB was invented inthe 1980s. One of the inventors responsible forNdFeB, John Croat, worked for General Motorsand was instrumental in the formation of Mag-nequench, a division of GM.

1980s: The American magnet industry reachedits peak in the late 1980s and early 1990s. At thetime, roughly 6000 people were employed pro-ducing magnets in the United States, with all keytypes of permanent magnets manufactured. Twoor three strong industry trade associations wereactive. Five manufacturers produced alnico, five

produced samarium cobalt, four produced NdFeB,seven produced ferrite, and one produced rareearth mineral and oxide magnets. In 1990, world-wide magnet production was 300,000 metric tons,with sales valued at roughly $2 billion. UnitedStates production comprised over 50% of these to-tals. (Fig. 2)

1990s: Significant changes during this decadecaused a dramatic decline in American magnetproduction. The off-shoring by various U.S. magnetproducers commenced and picked up momentum,as manufacturers first moved portions and thenfull lines of magnet production to China. The Chi-

nese mining operations grew substantially, andtheir low-cost products displaced other sources ofrare earth minerals provided to world markets.

28 ADVANCED MATERIALS & PROCESSES/AUGUST 2009

Fig. 2 This graph shows global production of rare earth oxides from 1950 to2000. The United States was a major player in the rare earth magnet market untilabout the year 2000. Source: U.S. Geological Survey

Permanent magnets in automobilesThe number of magnets in automobiles has been on the rise as

the number of motors increased from roughly twenty to as manyas two hundred over the last twenty five years. These magnetssupport systems from seat manipulation motors to electric powersteering.

Most recently, hybrid electric vehicles have escalated magnet de-mand with the needs of the motor/generator embedded in thetransmission that either recharges the batteries from the mechan-ical energy of the engine, or draws down the batteries so that the carcan operate in electric mode. In alternative energy technologiessuch as wind power, permanent magnets replace the excitation

windings of synchronous machines and eliminate mechanical gearboxes in higher efficiency generators.

1950 1960 1970 1980 1990 2000Monazite Placer era Mountain Pass era Chinese era

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Magnequench was sold off from General Motorsto a Chinese-led investment group in 1995.

2000s: In 2002, the rare earth mine in Moun-tain Pass, California, which contains some of theworlds richest deposits of these key minerals, sus-pended operations because it could not competewith Chinese producers. The Chinese moved theMagnequench operations to China in 2003, thenmoved the R&D Center from North Carolina toSingapore in 2003. In that same year, Vacuum-schmelze closed its operations in Elizabethtown,Kentucky, and consolidated production in Ger-many and Slovakia. Hitachi Metals procured Sum-itomos magnet business.

In 2005, the China National Offshore Oil Corpo-ration attempted to purchase Unocal, the ownersof Molycorp. However, this bid was rejected inWashington due to the concern of Chinese owner-ship of such a substantial U.S. energy interest,which didnt even recognize the danger in sellingoff these rare earth mines. In 2005 Hitachi closedits production facility in Edmore, Michigan, whichwas formerly part of General Electric, effectively

ending all NdFeB production in the USA.As the U.S. industry shrank, the U.S. industry

associations first consolidated, then finally dis-solved in 2007. In 2009, the Mount Weld Australiarare earth mine ceased operations, and the LynasCorporation sold a 25% stake in the company to aChinese firm.

Today: The U.S. magnet industry now em-

ploys roughly 400 people. There are now three Al-nico producers, one independent hard ferrite pro-ducer, one SmCo producer, and no NdFeB pro-ducers, even though NdFeB is now the largest seller

What are rare earths?Rare earths comprise a group of fourteen elements that were

largely undiscovered when the periodic table of elements was de-veloped. However, they are not rare; they are abundant within theearths crust. The deposits are generally not deep, and are easy toaccess through open pit surface mining. Figure 3 shows thestrengths of the various types of magnet materials.

Fig. 3 This graph clearly shows that neodymium-iron-boron magnets havethe highest energy product of all magnet materials. B = magnetic induction;H = magnetizing force; BH = Energy product.

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Columnar AlnicoAlnico 5

MK steelKS steel Co-Ferrite

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Sintered SmCo5

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Sm2 (Co-Fe-Cu)17

Sm2(Co-Fe-Cu-Zr)17

Nd-Fe-B

Sm-Fe-N

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and most recent type of permanent magnet ma-terial. Worldwide magnet sales topped $9 billionbefore the recession, with U.S. manufacturing ca-pacity a tiny portion of the total.

Molycorp has initiated steps to re-commencemining in California, and today the company isdrawing out materials set aside before suspendingoperations in 2002. There is no independent in-dustry association, although the permanent magnetgroup did become a division under the Small Mo-tors Manufacturing Association (SMMA), andplans to reintroduce a statistics program. Most of

the participants were once American magnet pro-ducers, but are now predominantly importers fromsources in Europe and (mostly) Asia.

The future of the U.S. industryAs recently as June 2009, Congress took small

but significant steps to counter this trend in themagnet and specialty metals industries.

First, the House Armed Services Committee in-cluded important provisions in its bill expressingconcern at the trends in domestic specialty metalsprosecution. The bill specifically mentioned highperformance magnets and the dependence of de-fense systems on foreign sources of NdFeB.

Additionally, the House of Representatives com-missioned a study by the Government Account-ability Office on the effects of such dependence ondefense systems.

These congressional actions are the first in a se-ries of steps that would be required to reverse thetrends of U.S. supply chain vulnerabilities. The tinyband of remaining high performance magnet pro-ducers and raw material suppliers is committed

to advancing the state of the art in magnet tech-nology and enhancing the U.S. manufacturingpresence in spite of tremendous challenges.

For more information: Peter C. Dent is Vice President ofBusiness Development at Electron Energy Corporation,924 Links Avenue, Landisville, PA17538; 717/459-1001;[email protected]; www.electronenergy.com.

High-performance magnetsHigh performance metal magnets consist of aluminum-nickel-

cobalt (Alnico), samarium cobalt (SmCo) and neodymium ironboron (NdFeB). These magnets exhibit the highest temperaturestability and maximum energy product (a measurement of amagnets ability to retain and provide magnetic flux).Thses magnets are produced by two methods: Casting: The pure molten alloyed metals are cast into molds,

heat treated, then machined to size and magnetized.

Powder metallurgy: The pure metals are melted, cast, crushed,and then milled to the 2 to 5 micron range, single crystals with asingle magnetic domain. They are then pressed in a magnetic fieldfor magnetic alignment, sintered, and heat treated. They are ma-chined to size by grinding techniques, then inspected and mag-netized. These rare earth-transition metal compounds have thehighest magneto-crystalline anisotropy and dramatically highermagnetic properties than all other magnet materials.

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