Permanent Magnets: the Demand for Rare Earths Suzanne Shaw Information Services and Steve Constantinides Arnold Magnetic Technologies 8 th International Rare Earths Conference November 2012
Disclaimer The statements in this presentation represent the considered views of 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 forwardlooking 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 forwardlooking 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.
Summary Overview of the rare earths market Permanent magnets current market trends Future demand for permanent magnets Consumption of rare earths in permanent magnets
Overview of the rare earths market
Global demand for rare earths by end-use in 2012 World: Demand for rare earths by end-use, 2012 (%) World official production of REO ~110,000t in 2012, 85-90% in China World demand ~120,000t in 2012, 65-70% in China 6% 7% 8% 13% 7% Magnets 21% Metallurgy Catalysts Polishing 120,000t Glass Phosphors 20% Ceramics Other 18% Source: estimates
Demand for rare earths by element in 2012 Other HREEs magnets, lasers, phosphors, glass, metallurgy, other Pr 5% Y Pr 7% Y Other HREEs 3% Ce 40% Ce polishing, metallurgy, catalysts, glass, phosphors, ceramics, other Pr magnets, phosphors, ceramics, metallurgy, polishing, other Nd 18% Nd La metallurgy, catalysts, glass, phosphors, ceramics, polishing, other Y phosphors, ceramics, other La 26% La Nd magnets, ceramics, metallurgy, glass, catalysts, phosphors, other Source: Bloomberg estimates
China continues to dominate global demand 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 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 China ROW Source: estimates
Permanent magnets current market trends
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
Types of permanent magnet Source: Arnold Magnetic Technologies
Different magnets for different needs Usable Temperature Range for Common Permanent Magnets Ferrite Neo Alnico SmCo 0-275 -200-125 -50 25 100 175 250 325 400 475 550 Temperature, ºC Source: Arnold Magnetic Technologies
Over the next 8 years demand for NdFeB magnets is forecast to grow by around 9%pa accelerated growth after 2016 Magnet production (kt) World: Permanent magnet production and value by type, 2005 to 2020 1,400 12,000 1,200 10,000 1,000 8,000 800 6,000 600 4,000 400 Magnet value (US$M) 200 2,000 0 0 NdFeB production NdFeB value Other permanent magnet production Other permanent magnet value Source: International Benecki, Clagett trade & statistics Trout, Permanent Magnets 2010-2020
China will maintain its position as the leading supplier of NdFeB magnets World: NdFeB magnet production by region, 2005 to 2020 (kt) 140 120 100 80 60 40 20 0 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f China Japan Europe Other regions (including USA) Source: International Benecki, Clagett trade & statistics Trout, Permanent Magnets 2010-2020
Applcations for RE permanent magnets Rare Earth Magnets by Application, 2012 year-end forecast 12.0% 2.6% 3.4% 4.1% 34.4% Motors & Generators HDD, CD, DVD Transportation Energy Production and Storage 5.6% Transducers Drives, Clutches, Braking 6.2% Relays, Sensors, Switches Appliances Wave Guides 7.2% 10.9% 13.6% All Other Source: Arnold estimates
Future demand for permanent magnets
Magnets, tons Traditional markets: Consumer electronics 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). Neo Magnets in HDDs, CDs and DVDs 15,000 13,000 11,000 9,000 7,000 5,000 2008 2009 2010 2011 2012 2013 2014 2015 HDD sales from isupplicorp: www.isuppli.com Source: Arnold estimates
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
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
Will future growth come from wind turbines? Global growth in wind turbine capacity, 1996 to 2011 (MW) 300,000 250,000 200,000 150,000 100,000 50,000 Global growth in wind turbine capacity of 27%py 2000 to 2011 Global capacity could reach 450GW by 2020, led by growth in China 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Annual Cumulative Source: Global Wind Energy Council
Growth in wind energy dominated by China Top 10 new installed capacity, Jan-Dec 2011 (%) Top 10 cumulative capacity, Dec 2011 (%) Canada 2% France 3% India 7% Portugal 2% UK 3% Italy 3% Others 13% China 26% Spain 3% France 2% Germany 5% Canada 3% UK 3% Sweden 2% Italy 2% Others 13% China 44% Spain 9% Germany 12% USA 20% India 7% USA 16% Source: Global Wind Energy Council
Wind turbine generator type and location Generator Design Generator Generator Output in MegaWatts (MW) rpm <1 >10 (approx.) Induction (no Permanent Magnets) Half Speed (200 kg magnets/mw) Direct Drive (600 kg magnets/mw) Superconducting (no Permanent Magnets) 1800 800 12?? Land-based older technology Land or offshore hybrid drive, simpler gearbox Mostly offshore Land or offshore Source: Arnold Magnetic Technologies
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 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? Source: Bloomberg
Annual Sales, Units Will future growth of come from EV/HEVs? 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 US Sales of Hybrid, PHEV and EV Cars, SUVs, Light Trucks All Others Mazda Mercedes Acura Mitsubishi Infiniti Series11 BMW VW & Porsche Nissan Kia Ford & Mercury Honda Hyundai Lexus GM Toyota - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F Actual sales in the US; 2012 through August annualised Source: www.hybridcars.com Bloomberg
Will future growth come from EVs/HEVs? BYD e-bus 10,000 9,000 8,000 7,000 6,000 5,000 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 4,000 3,000 2,000 1,000 0 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 Toyota and others are looking at induction motors in EVs in case the price of Nd becomes unsustainable or supplies are undependable Source: Bloomberg estimates
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 40,000 World: Demand for rare earth elements in magnet manufacture, 2000 and 2010 (treo) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000 2010 Tb Gd Sm Dy Pr Nd Source: International estimates trade statistics
Demand for rare earths in permanent magnets estimated at 25,500t in 2012 Demand for rare earths in permanent magnets, 2000 to 2017 (kt) 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 Source: Bloomberg and Arnold estimates
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
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 (CR 3, www.wpi.edu/academics/research/cr3/)
Tons, RE Magnets Future consumption of NdFeB 150,000 125,000 100,000 75,000 50,000 Without Dy constraint With limited Dy availability 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 25,000 0 2005 2010 2015 2020 After 2015: minor additional sources of dysprosium allow the market to expand slowly Chart based on existing technology regarding use of Neo at elevated temperatures and upon max use requirements of applications Source: Arnold Magnetic Technologies
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
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