FAQ - Frequently Asked Questions (and their answers!)
Why the price explosion for neodymium magnets?
Situation
The cost for the raw material neodymium, which is the determining factor in pricing a neodymium iron boron magnet, increased about fivefold between January 2011 and June 2011. Already in 2010, raw material prices doubled. China practically holds a monopoly on those raw materials. The country severely restricted the export and thereby sent prices soaring.What happened?
Already in 2010, the Chinese government started reducing the export of rare earth metals, to which also neodymium belongs. In 2011, the export quota decreased even more and measures were taken to implement and monitor the export quota. To accomplish that, most small mines were closed and the control of these raw materials was assigned to one state-controlled entity. This entity can now enforce the quotas specified by the government and, thereby, manipulate the price at will by creating a shortage.Reasons for export restrictions
- China would like to export high-quality products that contain these raw materials rather than just export the raw materials or raw materials and, therefore, capture the added value in the country. They rather sell motors and generators with neodymium magnets than just the raw materials.
- The supply for rare earth metals is limited. China anticipates that the internal consumption in the country will increase substantially in the coming years, due to the development of wind power for instance (a wind turbine generator contains up to 500 kg of neodymium magnets). This causes China to restrict the sale and stockpile those raw materials, so they will not run out in coming years.
- China realized that they can now demand much for money for these raw materials than in the past, since the country gained a monopoly position.
What's to come?
Other countries used to mine these raw materials. Only approx. 1/3 of the worldwide deposit is in China. But years ago, China flooded the world market with unbeatably cheap rare earth metals and magnets, which made it economically unviable for most mines and magnet producers outside of China to say in the business. As a consequence, the whole world relied on supplies from China.Now that prices explode and the fatal dependence is recognized, some of those mines started producing again. However, the know-how for the elaborate and complicated beneficiation of raw materials has been lost. Also, since a mine can't start operations from one day to the other, observers don't expect this situation to relax before the end of 2010. Additionally, the demand for neodymium magnets increases worldwide and some governments and companies started stockpiling them.
The combination of artificial shortage, hoarding, increasing demand and monopoly will probably lead to further price increases in the future. We anticipate that it will get worse before it gets better.
Consequences for supermagnete and for you as our customer
The costs of neodymium and other rare earth metals account for the majority of the costs of a magnet. Therefore, our production costs for magnets increase almost proportionally to raw material prices. Unfortunately, we have no choice but to pass this price increase on to you as our customer.What does that mean:
- Prices in the shop did not change in years. We now have to adjust our prices once or twice a month in order to not lose money.
- Since prices increased by 50% within 2 weeks, we can guarantee our prices only for a short period of time (currently one week).
