Dependence on Foreign Sources of Rare Earth Metals: A Case Study on Chinese Manipulation of High Performance Magnet MarketEd Richardson - Thomas & Skinner, Inc.
Thomas and Skinner was founded in 1901 by John Esterline, EE professor at Purdue University. In 1923 James Thomas and O.H. Skinner acquired the magnetics division. Today it is an employee-owned manufacturer of magnetic materials headquartered in Indianapolis, IN.
There are two types of magnetic materials: Hard (Permanent Magnets) and Soft Magnetic materials. Within the Hard Magnets are the "High performance" Rare Earth types which are SmCo and NdFeB. Chinese manipulation of these is the focus of today's talk. The SmCo types came to be in the 1970s and the NdFeB types (with the highest magnetic forces) came to be around 1980. Currently there are No NdFeB magnets being domestically produced despite great increases in demand (despite the recession).
The US Government created a Berry Amendment (now referred to as Specialty Metals Clause to protect our defense posture which requires domestic production of certain strategic metals. It does protect SmCo magnet materials from being imported, but fails to cover the newer high demand NdFeB.
During the 1990 all four domestic producers of NdFeB magnets (IG Tech, Hitachi, Crucible, and Magnequench) either discontinued US operations or were acquired by the Chinese transferred to China's facilities. Currently China produces 75% of the worlds NdFeB magnets and the US produces Zero. The US also suspended production by its only rare-earth mine at Mountain Pass in 2002, a mine which had be dominant in rare-earth production during the 1960s.
China has not been shy about stating its goals. In 1992 President Deng Xiaoping said "There is oil in the Middle East; there are rare earths in China. We must take full advantage of this resource." In 1999, President Jiang Zemin pledged to "Improve the development and applications of rare earth, and change the resource advantage into economic superiority." Despite this a US agency charged with producing a report on any foreign governments or companies pursuing a strategy to acquire US firms dealing with critical defense technologies, in 1994 found "no credible evidence" of an country having such a strategy. In 2005 the same agency found "the Chinese government embarked on a detailed strategy to control the rare earth market. As part of this strategy, two Chinese firms acquired a U.S. rare earth magnet producer (in 1995)". This was the purchase of Magnequench (of Anderson, IN) from GM.
In 1994 a Beijing trade paper stated that with the purchase of Magnequench China will literally found a monopolistic supply system of MQ powder. In 2005 the Hitachi of Michigan ceased production of the last NdFeB magnet material in America. In the meantime, having the monopoly, the Chinese government is taxing all export of rare earth oxides and alloys. It is also limiting the export in order to promote further "value-added" processing of Chinese products which use Rare Earth (including displays and High Power magnets.
Evidence of Chinese government price fixing of Rare Earths has also been reported.
Where does this effect Americans. NdFeB magnets are essential to wind turbine generators, hybrid vehicles, military guidance systems, and computer hard disk drives. There is 2000 lbs of Neo magnets in a single wind turbine generator. Production of 5 million hybrid cars could consume up to 35 million lbs of Neo magnets annually. Europe is vastly ahead of the US in Wind Power generation, and Japan is vastly ahead in hybrid automotives right now. The US has slipped from first to #8 in technological innovation. Offshoring of manufacturing has lead to low prices and high buying power for US consumers, but the cost has been loss of manufacturing jobs, loss of ability to R & D and engineer products, and serious jeopardizing of US economy to maintain any growth and leadership.
CLusters held promote innovation. A cluster of magnet producers used to exist in the mid-west US, but has all but disappeared to China. The longer the US continues without Super Magnet production, the more difficult it will be to ever obtain it again, putting both our defenses and economic future in jeopardy.