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Roskill

Permanent Magnets: the Demand for Rare Earths

Suzanne Shaw

Roskill Information Services

and

Steve Constantinides Arnold Magnetic Technologies

8th International Rare Earths Conference

November 2012


Roskill

The statements in this presentation represent the considered views of Roskill Information Services Ltd. and Arnold Magnetic Technologies (the “Presenters”). It includes certain statements that may be deemed “forward-looking statements”. All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although the Presenters believe the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in general economic, market or business conditions.

While the Presenters have made every reasonable effort to ensure the veracity of the information presented we cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.

Disclaimer


Roskill

Overview of the rare earths market

Permanent magnets – current market trends

Future demand for permanent magnets

Consumption of rare earths in permanent magnets

Summary


Roskill

Overview of the

rare earths market


Roskill Source: Roskill estimates

• World ‘official’ production of REO

~110,000t in 2012, 85-90% in

China

• World demand ~120,000t in 2012,

65-70% in China

World: Demand for rare earths

by end-use, 2012 (%)

21%

20%

18%

13%

8%

7%

6% 7% Magnets

Metallurgy

Catalysts

Polishing

Glass

Phosphors

Ceramics

Other

120,000t

Global demand for rare earths

by end-use in 2012


Roskill

Demand for rare earths by element in 2012

Source: Bloomberg

La

Nd

Y

Pr

Source: Roskill estimates

Pr

magnets, phosphors,

ceramics, metallurgy,

polishing, other

Y

phosphors, ceramics,

other

Nd

magnets, ceramics,

metallurgy, glass, catalysts,

phosphors, other

Ce

polishing, metallurgy,

catalysts, glass, phosphors,

ceramics, other

La

metallurgy, catalysts, glass,

phosphors, ceramics,

polishing, other

Other HREEs

magnets, lasers, phosphors,

glass, metallurgy, other Ce

40%

La26%

Nd18%

Y7%

Pr5%

Other HREEs

3%


Roskill Source: Roskill estimates

China continues to dominate global demand

World: Total demand for rare earths in China and

ROW, 2000 to 2017 (%)

• China is leading demand - 70%

in 2012

• Demand is increasing from

higher value applications

• Chinese demand to exceed 70%

by 2019-20

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China ROW


Roskill

Permanent magnets – current

market trends


Roskill

What are rare earth magnets

•NdFeB (neodymium iron boron, aka ‘neo’ magnets)

– Powder for bonded magnets: compression, extruded, injection molded

– Sintered (powder metallurgy)

– Hot rolled (no longer made): modified composition; Seiko-Epson

– Die-upset / forged, fully dense: Magnequench MQ-3 process (original and modified); Daido Electronics

•SmCo

– Sintered (powder metallurgy)

•SmFeN

– Powder metallurgy process resulting in a fine powder suitable for bonded magnets

– Unstable above ~450

C – no known method for achieving a fully dense magnet


Roskill

Types of permanent magnet

Source: Arnold Magnetic Technologies


Roskill

Different magnets for different needs


0

-275 -200 -125 -50 25 100 175 250 325 400 475 550

Temperature, ºC

SmCo

Alnico

Neo

Ferrite

Usable Temperature Range

for Common Permanent Magnets


Roskill Source: International trade statistics

Over the next 8 years demand for NdFeB magnets is

forecast to grow by around 9%pa – accelerated growth

after 2016

World: Permanent magnet production and value by type, 2005 to 2020

Source: Benecki, Clagett & Trout, Permanent Magnets 2010-2020

0

2,000

4,000

6,000

8,000

10,000

12,000

0

200

400

600

800

1,000

1,200

1,400

Mag

net v

alu

e (U

S$M

)M

ag

net

pro

du

cti

on

(kt)

NdFeB production Other permanent magnet production

NdFeB value Other permanent magnet value



China will maintain its position as the leading

supplier of NdFeB magnets

Source: Benecki, Clagett & Trout, Permanent Magnets 2010-2020

World: NdFeB magnet production by region, 2005 to 2020 (kt)

0

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f

China Japan Europe Other regions (including USA)


Roskill

Applcations for RE permanent magnets

34.4%

13.6%

10.9%

7.2%

6.2%

5.6%

4.1%

3.4%

2.6%

12.0%

Motors & Generators

HDD, CD, DVD

Transportation

Energy Production and Storage

Transducers

Drives, Clutches, Braking

Relays, Sensors, Switches

Appliances

Wave Guides

All Other

Source: Arnold estimates

Rare Earth Magnets by Application, 2012 year-end forecast


Roskill

Future demand for

permanent magnets


Roskill Source: Arnold estimates

• Important driver for permanent

magnet demand over the last 25

years

• Shipments of HDDs alone were

an estimated 660 million units in

2011 (~9,000t NdFeB)

• Future growth at lower rate

reliant on such issues as

Replacement in mature

markets

Expansion of cloud computing

Long-term substitution with

new technologies such as SSD

(solid state drives).

Traditional markets: Consumer electronics

Neo Magnets in HDDs, CDs and DVDs

5,000

7,000

9,000

11,000

13,000

15,000

2008 2009 2010 2011 2012 2013 2014 2015

Ma

gn

ets

, to

ns

HDD sales from iSuppliCorp: www.isuppli.com


Roskill

Traditional markets: Standard automotive

• Engine components, battery components, moving car parts and other

integral systems – larger magnets, ferrite and NdFeB

• Interior applications – smaller magnets, typically NdFeB

• Around 40 magnets in motors and actuators, and 20 sensors in a

typical car

• Average of 250g NdFeB and 10-20g SmCo

Primarily in small motors and sensors

• Car and light vehicle production

80M units 2011 ~ 20,100t NdFeB

Forecast 90-95M units by 2015, but increasing intensity of use


Roskill

Traditional markets: Electric bicycles

• Large and growing market, mainly in Asia

• >16M produced in China in 2008 and >30M in

2011

• Production increasing but so is legislation to

discourage use

Banned in South China cities of Guangzhou,

Dongguan and Shenzhen

Vehicles of 20 kg or more and a top speed of

30 km/h will require a motorcycle license to

operate


Roskill

Will future growth come from wind turbines?

Source: Global Wind Energy Council

• Global growth in

wind turbine

capacity of 27%py

2000 to 2011

• Global capacity

could reach

450GW by 2020,

led by growth in

China

Global growth in wind turbine capacity, 1996 to 2011 (MW)

0

50,000

100,000

150,000

200,000

250,000

300,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Annual Cumulative


Roskill

Growth in wind energy dominated by China

Source: Global Wind Energy Council

Top 10 new installed capacity,

Jan-Dec 2011 (%)

Top 10 cumulative capacity,

Dec 2011 (%)

China26%

USA20%

Germany12%

Spain9%

India7%

France3%

Italy3%

UK3%

Canada2%

Portugal2%

Others13%

China44%

USA16%

India7%

Germany5%

UK3%

Canada3%

Spain3%

Italy2%

France2%

Sweden2%

Others13%


Roskill

Wind turbine generator type and location


Generator Generator Output in MegaWatts (MW)

rpm <1 >10

Generator Design (approx.)

Induction

(no Permanent Magnets)1800

Half Speed

(200 kg magnets/MW)800

Direct Drive

(600 kg magnets/MW)12

Superconducting

(no Permanent Magnets)??

Land-based

older technology

Land or offshore

hybrid drive, simpler gearbox

Mostly offshore

Land or offshore


Roskill

Source: Bloomberg

Direct and hybrid drive wind power turbines

containing NdFeB

• Very little of the current installed capacity contains rare earths

Small and early commercial turbine designs used induction generators

Some small turbines converted to permanent magnets to improve efficiency

Generation-4 wind power generators designed to use permanent magnets for

commercial power production

• Only new design, Generation-4, large-size direct drive or hybrid (half-speed)

turbines rely on large quantities of NdFeB magnets

• Direct drives are favored for large offshore turbines.

These turbines have a higher production cost due to recent magnet prices but

are more efficient and reliable

• Other sources of renewable energy may also utilise permanent magnet

generators

Examples are tidal and wave power turbines


Roskill

Source: Bloomberg

Direct and hybrid drive wind power turbines

containing NdFeB

• The European Joint Research Centre estimates that turbines containing

permanent magnet motors will account for 15% of global market share by 2020,

increasing to a possible 20% by 2030

• Optimistic forecasts predict direct drives to grow by 50-60% 2012-2013, led by

growth in China, followed by slower growth of 10-20% to 2015 once penetration

stabilises

• However, companies still offer traditional geared models for smaller turbines and

could easily revert to this technology if Nd prices rise to unsustainable levels

• What is the future for direct drives in China?


Roskill

Source: Bloomberg

Will future growth of come from EV/HEVs?

Source: www.hybridcars.com

US Sales of Hybrid, PHEV and EV

Cars, SUVs, Light Trucks

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F

An

nu

al S

ale

s, U

nit

s

All Others

Mazda

Mercedes

Acura

Mitsubishi

Infiniti

Series11

BMW

VW & Porsche

Nissan

Kia

Ford & Mercury

Honda

Hyundai

Lexus

GM

Toyota

Actual sales in the US; 2012 through August annualised


Roskill

Source: Bloomberg

Will future growth come

from EVs/HEVs?

World: Forecast production of EVs/HEVs by type,

2010 to 2025 (000 units) • Production of EVs/HEVs

could reach 3.2-9.2

million by 2020

• In particular, HEV motor

systems often rely on

NdFeB magnets

• Toyota and others are

looking at induction

motors in EVs in case the

price of Nd becomes

unsustainable or supplies

are undependable


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2011e 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f

HEV (NiMH) HEV (Li-ion) PHEV (Li-ion)

BEV (Li-ion) Pessimistic total Optimistic total

BYD e-Bus


Roskill

Consumption

of rare earths

in permanent magnets



Over the last decade demand for Nd more than doubled

– driven by increased use of NdFeB magnets in

electronic equipment rather than “green” applications


World: Demand for rare earth elements in

magnet manufacture, 2000 and 2010 (tREO)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2000 2010

Tb Gd Sm Dy Pr Nd


Roskill

Demand for rare earths in permanent magnets

estimated at 25,500t in 2012

Source: Bloomberg Source: Roskill and Arnold estimates

• 96% NdFeB, growth

driven by consumer

electronics, standard

automotive, air

conditioning, electric

bicycles

• 3% SmCo for specialist, high

temperature

applications

• 1% SmFeN for bonded magnets

• ~78% China

• ~22% Japan, other

Asia and Europe

Demand for rare earths in permanent magnets,

2000 to 2017 (kt)


Roskill

Factors affecting future consumption of

Nd, Pr and Dy in magnets

• Demand for REEs in magnets is forecast to grow at 6-8% to 2016 – much of this

growth will be related to continuing demand for use in consumer electronic

equipment (as well as electric bicycles in China and southeast Asia in general)

• Higher growth rates likely from 2016 if “green technology” applications

materialise

• Concerns about high prices and availability could limit the extent to which NdFeB

permanent magnet direct drive generators are adopted for wind turbines

• Similarly, auto manufacturers are seeking alternatives to permanent magnet

motors in electric vehicles

• Additional sources of rare earths are still to be established; adequate light rare

earths (Nd and Pr) are expected to be available

• The key ingredient is the heavy rare earth, Dy (dysprosium), which is required for

neo magnets to perform at elevated temperatures - supplies of Dy are expected

to remain tight


Roskill

Factors affecting future consumption of

Nd, Pr and Dy in magnets

• Dy is seen as the limiting factor

• Research is underway in Japan and the USA to identify ways of reducing intensity of

use – already cut by half in some magnets

• Technologies in-play or under research include

• Diffusion of Dy into the neo magnet to reduce the total quantity required

• Induction and synchronous reluctance traction drive motors (no magnets)

• Research on nano-structured and exchange-coupled magnet materials with reduced

or no rare earth content

• Lower application temperature to reduce demand for Dy

• Superconducting generators for wind power

• Recycling (or re-use) is a major thrust area

• Hitachi, Showa Denko and Mitsubishi Materials are all researching ways of recycling

REEs from discarded hard disc drives and other appliances

• A variety of organisations are seeking to increase recycling such as the Center for

Resource, Recovery and Recycling (CR3, www.wpi.edu/academics/Research/CR3/)


Roskill

Future consumption of NdFeB

• Consumption of NdFeB

magnets constrained by

lack of availability of

dysprosium

• Between 2010 and 2015:

influence of Dy-diffusion

technique and device

temperature control will

permit modest growth

• After 2015: minor additional

sources of dysprosium allow

the market to expand slowly


0

25,000

50,000

75,000

100,000

125,000

150,000

2005 2010 2015 2020

To

ns

, R

E M

ag

ne

ts

Without Dy constraint

With limited Dy availability

Chart based on existing technology regarding use of Neo at elevated temperatures and upon max use requirements of applications


Roskill

Meeting the demands of the market

• In 2012 there is a discontinuity between the natural occurrence of REEs and the

ratio in which they are consumed

• The likely shortages of heavy rare earths (and possibly neodymium) will also

occur in China – how will this affect Chinese government policies – could it lead

to more restrictions on supply to the ROW?

• Supply of neodymium should ease from 2014/15 onward permitting expanded

Neo magnet use in electronics and other lower temperature applications

• It is unlikely that there will be any significant supply of HREEs from the ROW

before 2016/17 – companies dependent on a secure supply of dysprosium,

terbium and europium rely on the developing dynamics of the REE industry in

the south of China


Roskill

Roskill Consulting Group • Market assessments

• Feasibility studies

• Industry analyses

• Due diligence

• Competitive evaluation studies

Facing a major decision? We help you explore the impact

on the market - and the impact on you

Contact Suzanne Shaw

[email protected]

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