Recently, rare earth prices have gradually fallen, down more than 20% from the high in February, but the overall level is still higher than that in the same period last year. A number of industry insiders told the financial associated press that neodymium iron boron enterprises are divided under the influence of the sharp fluctuation of rare earth prices – the influence of large neodymium iron boron enterprises is limited, but small and medium-sized neodymium iron boron manufacturers are troubled by the rise in raw material prices.
Wu Wenjie, Secretary General of Ningbo chamber of Commerce for magnetic materials, told the financial associated press that affected by the soaring price of rare earth, the survival of downstream Nd-Fe-B production enterprises is facing difficulties, and the development of industrial chain and supply chain is restricted.
At the same time, the United States launched the “232” investigation on China’s neodymium iron boron for more than half a year. The United States and other countries have successively arranged local production in the industrial chain, so as to get rid of their dependence on China’s neodymium iron boron import. In this regard, Wu Wenjie pointed out that in the short term, China has certain advantages and dominance in terms of the layout of the upstream rare earth or downstream permanent magnet industry chain, but in the medium and long term, the United States has made frequent moves against China’s NdFeB, and its harm can not be underestimated.
small and medium-sized manufacturers raise costs and large manufacturers are troubled by price lock
According to the data of China Rare Earth Industry Association, as of April 21, the rare earth price index had fallen to 336.2, down 22% from the recent peak; But it is still nearly 40% higher than the same period last year.
In terms of specific products, on April 21, praseodymium and neodymium oxide quoted 83 Anhui Huamao Textile Company Limited(000850) 000 yuan / ton, down about 23% from the highest point in February. In addition, the quotation of neodymium oxide is 873 Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) 000 yuan / ton, and the quotation of praseodymium oxide is 86 Shenzhen Yan Tian Port Holdings Co.Ltd(000088) 000 yuan / ton, both of which have dropped to varying degrees.
In the short term, the price fluctuation of rare earth is mainly affected by the relationship between supply and demand and market sentiment. Baichuan Yingfu pointed out that the reason for the change in the supply-demand relationship of rare earth prices this time is mainly due to the mood and confidence of merchants. The interview caused the mood change, and the epidemic caused the lack of confidence. Once the epidemic situation is unsealed, consumption returns and production is normal, the backlog of orders leads to centralized procurement, resulting in a rapid rise in the price of praseodymium and neodymium. For dysprosium and terbium commodities, the price fluctuation will be greater due to the small supply.
For the future trend of rare earth price, Wu Longkun, rare earth analyst of Shanghai Ganglian E-Commerce Holdings Co.Ltd(300226) rare earth business unit, believes that at present, the epidemic situation in various parts of China is repeated, and the logistics and transportation in some areas are not smooth, resulting in the shutdown or reduction of production of terminal Enterprises in some areas, and the terminal demand is weakened, but the supply of oxygenates at the supply end is still tight. It is expected that the rare earth price will fluctuate weakly in the second quarter, and the decline range is limited.
In the long run, there is limited room for rare earth prices to fall. Wu Longkun pointed out, “with the gradual improvement of the epidemic situation in China and the gradual recovery of terminal demand, rare earth prices will remain at a high level under the situation of tight supply of raw material oxides and stable price guaranteed by the state.”
The rise of rare earth prices has doubled the cost pressure of small and medium-sized Nd-Fe-B production enterprises. Wu Wenjie told the financial Associated Press, “the price of rare earths has soared. Many small and medium-sized enterprises can’t get the goods due to insufficient funds. Even if there are orders, they can’t produce normally. At the same time, downstream customers can’t accept the high cost price. These small and medium-sized enterprises have become ‘sandwich’ under the pressure of upstream and downstream.”
Yu qiongfang, deputy general manager of a neodymium iron boron enterprise in Ningbo, also pointed out that most of the customers of small and medium-sized neodymium iron boron manufacturers are also small and medium-sized enterprises. The two sides generally do not sign long-term agreements, and their rare earth inventory can not catch up with the rise of rare earth prices.
A senior industry insider told the financial associated press that the current irrational development may eventually lead to sharp fluctuations in market prices. The sharp rise and fall of rare earth prices is very profitable for investors, but it is extremely unfavorable to industrial development. Feng Lifeng, chairman of Ningbo cocoa Magnetic Industry Co., Ltd., said in an interview with the financial associated press that the fluctuation of rare earth prices is like a heartbeat to small and medium-sized permanent magnet production enterprises, and can’t stand the sharp rise or fall.
“Under normal circumstances, the net profit of small and medium-sized enterprises is generally around 15%. In case of the sharp rise of rare earth prices, the profit may fall to 5% and even lose money.” The aforementioned insiders told the associated press of finance.
Unlike small and medium-sized enterprises plagued by rare earth costs, large permanent magnet material enterprises generally have established strategic cooperation with the upstream and can obtain raw materials at a cost lower than the market price. In addition, large enterprises can also transfer the price rise of rare earths to the downstream. “On the one hand, the company produces customized products and requires customers to sign contracts according to the market real-time price; on the other hand, some customers sign long-term agreements with the company, including price adjustment mechanism. For example, the sales price can be adjusted according to the market price every quarter.” Yu qiongfang said.
However, the price transmission is not unimpeded, and large permanent magnet material enterprises are also facing the problem of price locking. The result of downstream price locking is that manufacturers cannot transfer costs through price increases and must digest the pressure of rising costs by themselves.
In addition, the current epidemic in China also has a great impact on the company’s orders, “mainly due to the lack of logistics, the goods can’t be sent out, and individual goods can’t come in.” Feng Lifeng said.
technology substitution worries
Nd-Fe-B is mostly used in new energy vehicles, variable frequency air conditioning, wind power generation, industrial automation, intelligent consumer electronics and other fields.
It is reported that in the face of soaring rare earth prices, some motor manufacturers have reduced the use of neodymium iron boron magnetic steel by modifying the product design, and selected low-cost ferrite to replace neodymium iron boron, which is mainly concentrated in the middle and low-end fields.
According to Wu Longkun, in addition to ferrite, samarium cobalt permanent magnet can also replace neodymium iron boron. They belong to the first and second generation permanent magnet products, and their technology and industry development have been very mature. He pointed out that NdFeB is divided into seven brands according to different performance. Some brands can be replaced. Some terminal industries have strict performance requirements, while NdFeB cannot be replaced temporarily, such as rare earth permanent magnet motor of new energy vehicle.
In addition, some wind power enterprises turn to semi direct drive or doubly fed fans Xinjiang Goldwind Science And Technology Co.Ltd(002202) disclosed in the 2021 annual report that the company’s units adopt the “two wheel drive” technical route of direct drive permanent magnet and medium speed permanent magnet, while Xinjiang Goldwind Science And Technology Co.Ltd(002202) previously adopted direct drive permanent magnet technology, which means Xinjiang Goldwind Science And Technology Co.Ltd(002202) is returning to semi direct drive technology. In addition, Harbin electric power wind energy and Shandong CRRC and other enterprises have also begun to test the semi direct drive route.
Yu qiongfang told the financial associated press that for the leading enterprises, what they fear most is the systematic risk, that is, technology substitution. “The weakness of large enterprises is that it is difficult to turn around. After putting hundreds of millions of equipment and technology into a product, once the downstream customers change the design and no longer use the product, it will cause a huge blow.”
According to her prediction, customers of large companies will not feel the rise in costs until the second and third quarters of this year. Once they feel it, they may study and take alternative measures.
This concern is not groundless. Yu qiongfang said that there was a precedent for downstream technology substitution in 2011. At that time, the price of rare earth soared, and some enterprises did not hesitate to return to the era of low-end ferrite, resulting in the depression of the industry for three or four years.
In January 2011, affected by the news of the decline of rare earth export quota, rare earth resources were hyped by the market, and the price of rare earth increased exponentially. In less than half a year, the price of light rare earth increased by more than three times and the price of medium and heavy rare earth increased by more than five times.
On June 22 of that year, the quotation of praseodymium neodymium oxide reached 1275000 yuan / ton, about 16% higher than the highest price in February this year.
Wu Longkun believes that if rare earth prices continue to rise or run at a high level, enterprises will be forced to find alternatives to neodymium, iron and boron. The specific price to exceed should be determined according to the actual needs of customers.
us “232” survey
China’s NdFeB is also facing geopolitical pressure. On September 24, 2021, after Biden took office, the Chinese government made the first investigation of “neodymium”.
The US “232” survey lasted for one year, and now the survey time is more than half. Many interviewees told the financial associated press that if the United States believes that China’s NdFeB has an impact on its national security, it will probably support the construction of its own rare earth permanent magnet industry chain. Yu qiongfang analyzed that at present, many countries in the world, including the United States, Japan, Germany and other countries that are more dependent on China’s rare earth permanent magnet enterprises, are advocating to disperse China’s supply chain and get rid of their high dependence on China.
In fact, the developed countries led by the United States have long planned to layout the localized production of the permanent magnet industrial chain. Six months before the US launched the “232” investigation, members of the “Quartet security dialogue” mechanism, the United States, Japan, India and Australia jointly wanted to form a “Rare Earth Alliance” to replace China’s leading position in the world.
While the United States launched the “232” investigation, European and American countries also began to accelerate the layout of rare earth permanent magnet industry chain: from September 16 to 25, 2021, Bain Capital, an American private equity investment company, officially completed the acquisition of Hitachi Metals Co., Ltd; In November, the UK offered to fund the construction of a rare earth permanent magnet plant that can meet the demand of 1 million electric vehicles by 2024; In December, the United States plans to cooperate with German vacuum company to build a neodymium iron boron plant with an annual output of 1000 tons in Texas.
The above-mentioned senior insiders pointed out that the United States has completed the acquisition of Hitachi metal and obtained the production technology and patent right of NdFeB. The patent problem may become a sharp sword hanging on the head of Chinese permanent magnet enterprises, which can be used as a tool to control or even detain the export goods of enterprises at any time. “In the future, if patents are used to restrict or create incidents, Chinese NdFeB enterprises may face difficulties and infringement risks.”
According to the public information, more than half of the patents related to rare earth permanent magnet materials in the world are monopolized by Japan. The international leading enterprises represented by Hitachi metal carry out large-scale patent cross licensing with their patented technology, strictly protect their own patents, and build a solid patent barrier for Chinese rare earth permanent magnet enterprises.
At present, eight enterprises in China have obtained the patent authorization of Hitachi Metals, namely Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) ( Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) . SZ), Advanced Technology & Materials Co.Ltd(000969) ( Advanced Technology & Materials Co.Ltd(000969) . SZ), Ningbo Yunsheng Co.Ltd(600366) ( Ningbo Yunsheng Co.Ltd(600366) . SH), Yantai Zhenghai Magnetic Material Co.Ltd(300224) ( Yantai Zhenghai Magnetic Material Co.Ltd(300224) . SZ), Earth-Panda Advanced Magnetic Material Co.Ltd(688077) ( Earth-Panda Advanced Magnetic Material Co.Ltd(688077) . SH), as well as unlisted Beijing magnetic materials technology Co., Ltd., Beijing yinaginco Technology Co., Ltd. and Ningbo Jinji strong magnetic Co., Ltd. According to public data, in 2021, the proportion of direct export business of the above five listed companies in revenue was 55.49%, 25.80%, 30.82%, 36.59% and 27.34% respectively.
Zhou Gaofeng told the financial associated press that the construction of rare earth permanent magnet industry chain is only a matter of time. Rare earth is not the key to the “neck” of the permanent magnet material industry, but the relevant technology patents. Wu Wenjie further pointed out that if the United States wants to rearrange the construction, it needs to comprehensively consider the support of various factors, and it is preliminarily estimated that it will take 3-5 years to cultivate the construction.
“We don’t have much time left.” She said.
