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The Price of Neodymium – Another drop?

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?

neodymum1.15Well, 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.


The Price of Rare Earth Neodymium Magnets – Further Falling but not crashing.

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:

Dive! Dive!

Dive! Dive!


The Price of Rare-Earth Neodymium Magnets -Crash! Crash! Crash!

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:

Dive! Dive!

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.


The Price of Rare Earth Neodymium Magnet Prices – A small bubble bursts?

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.


Neodymium, Rare Earth Magnets, Part 2 – Price Levelling Out

As we noted in our previous blog entry on the price of Neodymium the cost of Neodymium has skyrocketed this year due to a combination of increased taxing in China, restrictions on exports, and other causes. It has had a bit of an effect on casual use of Neodymium magnets as toys – the very popular BuckyBalls, for example is facing its second price increase this year alone. The manufacturer is reacting to the price increases by producing a lower cost product with fewer magnets.

The ‘good’ news is that is seems the price of Neodymium may be leveling out.

Graph courtesy of Metal-Pages.com

That of course is somewhat bittersweet news. This leveling out has taken place after the price has increased 3x-6x-fold depending on how you measure.

Will the price go down? Hard to say and we are lovers of science, not economists. We can say that there are signs that companies in countries outside of China are a little tired of China having such a monopoly and are taking matters into their own hands and starting mining and production facilities. We are taking these developments as a sign that prices are expected to remain significantly  higher than they used to be in the recent past for the long term. Otherwise such dollar investment in production would be a dangerous play if this were a bursting price bubble. China  says they plan to use the new tax towards new pollution controls,  and has little reason to ease its export restrictions after just a few months. Domestic companies’ production efforts are unlikely to cause a bubble burst as they will not be producing rare-earth magnets to glut-inducing levels.

One other thing to consider is that despite these massive recent increases, Rare-Earth magnets are still much cheaper now than they were in the past. A glance at a science catalog from the year 2000 (before Chinese production really ramped up) shows that a 1″ disc magnet cost $13.95! A comparable product after the recent price increases only costs just $5.99. In another comparison, a 1″ disc made of Samarium Cobalt (another type of rare earth used for magnets – less powerful but able to resist high temperatures) cost nearly $50 in 2000.

Neodymium (Rare-Earth) magnets are many times more powerful than regular magnets. They are not only used in toys, but also in hard-drives,  hybrid automobiles, and a host of other devices in our everyday life.


Neodymium, The Rare Earth Magnet, and its Price.

Neodymium is the 60th element on the periodic table and the primary material for high-power, Rare-Earth Magnets. These Neodymium magnets have about ten times the power of regular ferrite magnets.

  Of late, however, Neodymium has been undergoing some rather abrupt pricing changes. In the past, it was a moderately expensive element, which kept high power magnets on the pricey side. But once China’s mining industry and production capabilities came up to speed, the price dropped dramatically and soon China had a lock on the mining market. Most domestic neodymium mining closed down.

Neodymium is not rare, it is found all throughout the Earth’s crust. But finding deposits worth mining can be tricky. China soon reduced exporting neodymium to develop their magnet industry. This  meant that while getting raw neodymium was difficult, cheap rare-earth magnets were soon widely available. Rare-earth magnets become so affordable that they are almost like toys. In fact, many toys do employ neodymium magnets and would not work with normal magnets. Neodymium also pops up in other ways: high power remote-control toys use motors with neodymium magnets. Neodymium is also used in many high capacity batteries, and power generating windmills require them for the highest output.

But of late there have been issues with magnet supply – we’re not running out – but China kept Neodymium prices under heavy control while their magnet industry developed. At the beginning of this year, China loosened those price controls. As a result the price of neodymium skyrocketed – as much as quintupled since the year began.

Local vendors tried to keep their prices down as long as they could, but they could not absorb price increase after price increase. In the past month alone Spectrum Scientifics has gotten three notifications from vendors that product prices would be increasing as the magnets in them became more expensive.

Will this sort itself out? It is hard to say and at Spectrum we are science-lovers, not miners or economists. Some have cried ‘Peak Neodymium!’ over the price increases but other assure us that there are deposits all around the world, but then another element needed for Neodymium magnets, Dysprosium, becomes a factor as there are very few deposits to mine. Solutions may be found but at present the industry is lagging.

Sadly, this does mean some toys we sell at Spectrum Scientifics will go up in price, as will a lot of other things. Did you know a Toyota Prius needs almost a kilogram of Neodymium?

Update: See more developments on the price of Neodymium