In our last exciting report on the Price of Neodymium it looked like the price per kg of the Rare Earth magnet material had stabilized in the upper 80’s. Another 6 months have gone by and what has happened?
Well, looks like it took another hit. The price dropped suddenly in November and hasn’t recovered. In fact it seems to have dipped a bit more in December.
What happened? It may be hard to tell, some articles point (indirectly) to how China’s efforts to restrict the export of rare earth magnets may have backfired on them as they now possess an overabundance of production and markets reducing as hybrid cars reduce their rare-earth usage and the US is set to restrict the usage of rare earth magnets in toys.
Another factor might be the global drop in oil prices, which have resulted in reduced costs across the board.
Will this continue? It is hard to say. One source states that China is continuing to restrict their market production while expressing concern about their drop in the market share. We’re scientists, not market experts, so we cannot say for certain.
Neodymium magnets are used in stereo loudspeakers, TV’s, turbine systems, car parts, science instruments, and even smartphones.
It has been 9 months since we did an article on the price of Rare Earth Magnet material, Neodymium. At that time to price was doing see-saws from 75 to 105 in price per kg:
So what has gone on those past 9 months? Not a whole lot, actually. Have a look at the latest movement:
Now it may look like there are some dramatic drops in price there if you look closely at the scale you will note the price variations are only $2 per kg. That makes the movement on the chart much less varied than the $30/kg variations it was experiencing last year around this time.
Has anything happened to cause this? Not much that we can determine. Mexico is considering adding itself to the list of Neodymium producers, but this is recent and does not seem to have done much to the price. Demand for electronics has not exactly spiked nor crashed. It may simply be that the wildcat speculators have left the market after making their profits or losing their shirts. The resulting market may simply be a more natural one without the roller-coaster effect speculation can bring.
So it was less than a few months ago that we discussed the price of Neodymium. Since that time the price continued to fall (it was shown reaching down to 150 $/kg in the graph in that post). So what has the price of Neodymium done since then? Well it seems to be….bouncing.
From 150$/kg at the bottom of the last graph the price seemed to continue to drop down to 90 all the way to about 75$/kg. Then it started rising again in the mid-summer. Then just a couple of weeks ago the prices started to fall again. So what happened? Apparently the price rise was based on speculation that a very large order from China’s State Reserver Bureau was in the works, but fell through. China is also experiencing some economic woes in their commodities markets.
Another factor is that other nations besides China have been working on their own Neodymium production. Russia invested heavily this year on rare-earth production to prevent dependence on China’s output. In the US the National Strategic and Critical Minerals Act was passed which is designed to speed up approval of mining operations.
All of these actions are in response to China’s heavy restriction on Neodymiums over the past year that caused a massive upsurge in Neodymium price before it crashed. It is hard to tell if China was flexing its economic muscles and is now paying the price, or if it was legitimately trying to control mining production and pollution issues but ended up stinging the world market.
It is also possible that Neodymium may continue simple rises and falls like any marketplace commodity, no longer rock-bottom but also no longer with sky-high prices.
It has been slightly over a year since we last looked at the price of Neodymium (the rare Earth used in making powerful magnets) and at the time we were watching the price take a nose-dive as speculators went for profit-taking, US and Japanese facilities were being brought on-line, manufacturers source other materials and on the consumer end, many rare-earth based toys were strongly modified, or in the case of the most popular Rare-Earth Magnet Toy, BuckyBalls, outright destroyed by safety concerns.
This was the graph showing the price of Neodymium at the time:
Somewhere in 2008-2009 a few people started realizing that a bunch of spherical high-powered neodymium magnets were lots of fun to play with. They were an excellent ‘fidget’ toy. They could also be used to make different structures and were overall a lot of fun.
By the time you read this, BuckyBalls will be a thing of the past. Less than two months ago BuckyBalls announced that they would no longer sell to stores in order to control who buys it. Then, less than two weeks ago, they announced that they would no longer produce BuckyBalls or BuckyCubes. The few sets that remained would be sold online only. In effect, the company was being put out of business.
Why? The CPSC (Consumer Product Safety Commission) initially was satisfied with BuckyBalls efforts to restrict sales to children back in 2010, this year they decided the measures were not enough and demanded that BuckyBalls cease selling them altogether. BuckyBalls was essentially regulated into oblivion.
The reason for this action was that there had been incidents where children swallowed the magnets. Swallowing one magnet is not a problem, but swallow two or more and they will ‘pinch’ in different parts of the intestine. There were no deaths but the surgery to resolve this is messy and complicated. There were some 2 dozen incidents out of 2.5 million sets of BuckyBalls sold. In all cases the swallowing was done by children (usually pretending to have tongue or facial piercings) who were not supposed to have the BuckyBalls per the warnings from the company.
There are other companies that produce spherical magnets, but the quality seems to vary from company to company. One set we got as a sample lost its nickel coating very quickly and tarnished. Another lacked the ‘power’ that makes BuckyBalls effective. A further one seemed to use regular magnets with nickel coatings so that it resembled BuckyBalls but was not.
We are saddened by the loss of this product. While it is bad that some kids were injured it should also be noted that BuckyBalls took great pains to keep kids from getting them. It seemed like each week we would get another set of stickers and instructions on who and how to sell BuckyBalls. In all the medical cases the product was being used improperly, and by people who should not have had them.
If you still want some, as of this writing BuckyBalls had a few thousand units remaining that they are selling solely on their own website www.getbuckyballs.com.
Well, it has been a few months since we last looked at the price of Neodymium. We last looked at it back in September when the pricing bubble began to burst and speculator-driven prices began to drop. This is the graph that we posted at that time:
In September the price was in a drop.
The price of Neodymium had just started to tumble at that time from a peak of about $450/kg to just over $300/kg. So how has Neodymium fared more recently? Let’s have a look:
Its looks like it is pretty much in free-fall. The price seemed to level in January but failed to hold and continued to drop through lat winter. The price is now just over $150/kg. If you invested in Neodymium in July of 2011, you might not be a happy speculator right now.
But let’s keep this in perspective: In 2008 the price of Neodymium in China was at a mere $6/kg, so while the drop from $450 to $150 might seem huge, it is still many times larger than the price when China was cornering the market.
We still do not know how much further the price will drop or if it will level off. Some costs will remain with us: China’s pollution-fighting duties, etc. But the fact that several companies switched from using Neodymium to other sources (such as the Toyota Prius). Domestic production and other rare-Earth mines outside of China have also started producing and it is not in their interests to see Neodymium drop too low -while US mining companies might be happy to get $450 a kg, they will probably be OK with lower prices – but not the cellar low $6/kg.
Neodymium magnets are used in not just toys, but also in stereo loudspeakers, TV’s, turbine systems, car parts, science instruments, and even smartphones.
At the beginning of this year China, which controls that vast majority of Neodymium production in the world, decided to centralize production. They put taxes on the product to pay for pollution controls (mining and refining can be a messy business) they also controlled exports in order to utilize the magnets for their own ends. This caused a quite a stir as prices skyrocketed and manufacturers of toys and other magnet using products found their materials costs rising rapidly. Many vendors informed us of price increases 2-3 times this year where in past years there may have been just one set of price changes. It also threatened the price of hybrid cars, which use at least a kilogram of Neodymium.
But a few months ago, we noted that the price of Neodymium leveled off. It hindsight it should have been fairly obvious – prices can’t increase 100% every month. We went on the assumption that the prices might drop a little bit but would likely remain high as domestic production of Neodymium ramped up and dropping prices might discourage such investments, and China had little reason to change its present policies.
China Prices Have Dropped But Still Remain High
However, there were other factors in Neodymium pricing at play. These factors have resulted in a bit of a price crash over the past month. While the price out of China remains high, it has come down quite a bit. But the Bloomberg Rare Earth Metals index has actually dropped below last year’s levels!
There are apparently several reasons for this crash. One is speculation – whenever a commodity rises fast in price there are inevitably economic speculators who jump into a buying spree and hold the product hoping to get as much re-sale out of it. This can be quite profitable, but if you join at the wrong time you can get caught in a crash or bursting bubble of prices. It seems that this happened to a lot of speculators when the demand dropped.
And why did the demand drop? Well, high prices discouraged a lot of casual use of high-power magnets, but Toyota was working on a rare-earth free induction motor in response to China’s 2010 restrictions. Other car companies plan to use such motors in their hybrids as well.
Prices are still high compared to the incredibly low prices of 2008-2009 when Chinese
production was at a high point and prices at a low point – this is the era when rare earth magnets started to be used in toys! But at least the era of rapidly skyrocketing prices of rare earth magnets would seem to be over for now.