The acquisition model began to change. The price jumps have even affected domestic manufacturers, Hatch says. "What we see in the magnet industry in China is that there are definitely supply issues for the neodymium-based alloys. I've heard numerous people say, 'My magnet quote is usually good for 30 days before I place the order. Now the Chinese magnet guys say we have two days to place the order, and they need 50 percent of the money up front, and they will tell us what the final price will be on delivery.' It has just completely changed the whole dynamics of the industry."
Interestingly, though perhaps not surprisingly, the price issues are not tied to any sort of absolute shortage.
"The actual supply of these materials has not been in jeopardy," he said. "The irony is that the export levels have not been met. In other words, the legal official channels for exporting these materials have produced a lower volume of exports than the limit."
Nevertheless, prices continue to rise and have spurred the search for alternative technologies and suppliers. Hatch follows 381 rare earth projects, of which 20 involve proven resources or have been targeted for focused development. "The thing I get asked a lot is when is this going to sort itself out. There are a couple of projects [under way] in Australia and South Africa. In the next couple of years, we will have new sources for some of these materials, so we would expect the price to come down on the light rare earth elements.”
In particular, his projections indicate that Nd supply, including Chinese exports, will outstrip demand by 2013. Heavy REOs like Dy won't equalize until closer to 2016. Beginning in 2013, Australia will be the primary non-Chinese source of REOs, with Canada and the United States following a few years after.
To learn more, download Hatch’s free report here. It provides an enormous amount of detail on hold sources, new sources, and supply scenarios for all the relevant materials.
The good news is that the situation will improve. The bad news is that you have to design products now. These facts present a quandary. If your development timeline is three years, do you stick with rare earth magnets and assume prices will equalize by the time your product goes into volume production? Or do you turn to an alternative technology, trading price for size and performance?
Hatch's advice is not to make rash decisions. "Rare earth-based alloys and components do some really amazing things. I can understand folks wanting to design the pain of the price out, but it just depends on how far out you can go with either reducing size or tolerating cost increases. I say don’t throw the baby out with the bathwater."
For further reading
Rare Earth Shortages Revive Alternatives.