An Overview of the Current State of US Permanent Magnet ProductionUS Permanent Magnet Production

Neodymium Magnet Workshop ALMA Symposium y pJanuary 14, 2012

Ed RichardsonVice President, Thomas & Skinner, Inc.

President, USMMA

Thomas & Skinner, Inc.19011901 Company founded by John Esterline,

EE f P d U i i

,

EE professor at Purdue University19231923 James Thomas & O.H. Skinner

acquired magnetics division

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Thomas & Skinner, Inc.TodayToday Employee-owned manufacturer of

Thomas & Skinner, Inc.

magnetic materials headquartered in Indianapolis, Indiana.

Markets:Aerospace Industrial Defense Oil Exploration Medical

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Mission

The mission of the United States MagneticMaterials Association is to promote domestic

production of the entire supply chain of materials used in magnet systems production to serve our

nation’s defense needs.

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Four Types of Permanent MagnetsFour Types of Permanent Magnets Commercially Available Today

Alnico Samarium Cobalt

Neodymium Ferrites Iron

Boron

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Improvements in Magnet Strength

50

60

400

440

480OTHER IMPORTANT CHARACTERISTICS

REQUIRED MAGNETIZING FIELD THERMAL STABILITYMECHANICAL PROPERTIES

40

50

320

360

400

GO

e

u m

eter

Nd-Fe-B

MECHANICAL PROPERTIES CORROSION RESISTANCE

MANUFACTURABILITY COST

30

200

240

280

max

-- M

G

ax --

kJ/

cu

SmCo 1-5 and 2-17

10

20

80

120

160BH

m

BH

ma

KS STEEL MK STEEL ALNICO 5

COLUMNAR ALNICO

SINTERED FERRITE

BONDED ISOTROPIC NdFeB

1900 1920 1940 1960 1980 20000 0

40KS STEEL MK STEEL ALNICO 5

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YEAR

Four Types of Permanent MagnetsFour Types of Permanent Magnets Commercially Available Today

High Temp /

AlnicoSamarium

CobaltHighest

Temperature

g pHigh Max

Energy Product

Neodymium Lowest Highest

Product

Ferrites Iron Boron

Lowest Cost Maximum

Energy Product

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Four Types ofFour Types of Permanent Magnets

AlnicoSamarium

C b ltAlnico Cobalt

NeodymiumRare Earth

FerritesNeodymium

Iron Boron

Earth

Boron

N t D ti ll1/14/12 9

Not Domestically Produced

Specialty Metals ClauseSpecialty Metals Clause

Defense Federal AcquisitionDefense Federal Acquisition Regulation Supplement(or DFARS 252 225 7014)

The purpose of this law is to

(or DFARS 252.225-7014)

The purpose of this law is to maintain and support the defense i d i l b f h i iindustrial base for those items it

covers.1/14/12 10

Specialty Metals Clause Applies to S M t M t i l N t AllSome Magnet Materials, Not All

Hard (Permanent) Magnets• Four general types:

– Alnico– Rare Earth

• SmCo

Covered by the Specialty Metals Clause

• NdFeB

– Hard Ferrites

p y

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Current State of US Magnet Production

U.S. Manufacturers in 1990sNdF B (d ) M t

U.S. Manufacturers in 2011( )NdFeB (dense) Magnets

Ugimag (IG Tech.)HitachiCrucible

NdFeB (dense) Magnets(none)

CrucibleMagnequench

Sintered Ferrite Magnetsld

Sintered Ferrite MagnetsHi hi (Chi G )Arnold

Hitachi (Edmore, China Grove)TDKCrucible Magnetics

Hitachi (China Grove)TDK

Crucible MagneticsGeneral MagneticSumitokKane (Stackpole)

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Kane (Stackpole)

Current State of US Magnet Production

U.S. Manufacturers in 1990s U.S. Manufacturers in 2011Alnico Magnets

ArnoldCrucible Magnetics

Alnico MagnetsArnoldPermanent Magnet Company

HitachiPermanent Magnet Company Thomas & Skinner

Thomas & Skinner

SmCo MagnetsArnoldCrucible (1 5)

SmCo MagnetsArnold EECCrucible (1-5)

EECHitachiIG Technologies (Ugimag)

EEC

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IG Technologies (Ugimag)

China Dominates M t M t i lMagnet Materials

2010 Worldwide Total Market Size f M t M t i l $7 5Bfor Magnet Materials = $7.5B• Projected $8.8B 2015

j $• Projected $15.5B 2020Produce over 75% of

ld’ NdF B t

Starting in the late 1990’s, Japan, US and European producers

world’s NdFeB magnets• Japan produces 22%

close plants and move production to ChinaCHINA

Rare Earth Oxide Ore production = 94% of global demand

• well over 50% of global reserves

Over 50% of worldwide Alnico & SmCo production

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production

REE Production Trends

130,000Other USA China

ns

80,00090,000

100,000110,000120,000

, met

ric

ton

30,00040,00050,00060,00070,000

,

rodu

ctio

n,

010,00020,00030,000

1956 1966 1976 1986 1996 2006

P

MonaziteMonazite--placer era placer era ││Mountain Pass era Mountain Pass era ││Chinese eraChinese era

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Strategic Economic Weaponryg p y“There is oil in the Middle

East; there are rare earths inEast; there are rare earths in China. We must take full advantage of this resource.” P id t D Xi i 1992President Deng Xiaoping 1992

“Improve the development andImprove the development and applications of rare earth, and change the resource advantage into economicadvantage into economic superiority.”President Jiang Zemin 1999

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China: Controlling the RE Market “Rare Earths Industry

Development Plan in 2009-2015”• Drafted by China’s Ministry of Industry and Information

Technology.– “Mining of rare earths should seriously abide by

production quotas.”– Beijing will also restrict exports of rare earths in the

next six years, • annual export quota will be below 35,000 tpy and

exports of dysprosium, terbium, thulium, lutetium and yttrium will be prohibited

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y p

China: Controlling the RE MarketChina: Controlling the RE Market “We think prices rising this year (2006) is theWe think prices rising this year (2006) is the comprehensive effect of many factors. It is the result of macro control of Chinese governmentresult of macro control of Chinese governmentand stable growth of Chinese economy. Self-adjustment of the RE industry and other factorsadjustment of the RE industry and other factors from Chinese and oversea markets have a conjunct effect to the prices as well ”conjunct effect to the prices as well.

Source: China Rare Earth Information Center (September 2006)

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Neo Magnets in Energy and Defense Applications

• Wind Turbines– Generator

• Hybrid VehiclesHybrid Vehicles– Generators and Drive Motors

• Guidance systems• Guidance systems– JDAM

• Computer Hard Drives

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Impact of Offshoring Neo Production on US Innovation is Clear

• Current technology for neo magnet windmills gy gcame from Europe– They are years ahead of us in terms of installationsy y– Europe has maintained neo magnet production

• Current hybrid car technology using neoCurrent hybrid car technology using neo magnets comes from Japan

They are years ahead of US producers– They are years ahead of US producers– Japan has maintained neo magnet production

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Innovation• Critical to US economy

– Innovation is a key trait of the companies listed in the Business Week 50, an annual ranking of the top-

f i i i A i (BW 6/17/10)performing companies in America (BW, 6/17/10)

For the US magnet industry to be relevant, it has to be a part of innovative activity.it has to be a part of innovative activity.

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An Important StudyAn Important Study

“Off h i t h l i ti A• “Offshoring technology innovation: A case study of rare-earth technology”, Fifarek, Veloso and Davidson Journal of Operations Management Vol 26 2008Davidson, Journal of Operations Management, Vol. 26, 2008

– Analyzed how offshoring affects the rate of innovationk d l f & ff d d ll l– Looked at results from R&D efforts conducted collectively

by firms at their home location.S ifi ll it d th d t f th th t– Specifically cited the departure of the rare earth magnet manufacturing base from the US as an example of innovation capability that has been lost

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innovation capability that has been lost.

Offshoring Manufacturing: g gImmediate Impact

O ti i i l b l d tiOptimizing global production

Round-the-clock shifts and lower costs

Expanded markets, lower prices for consumers and the creation of new business opportunitiesand the creation of new business opportunities

for existing firms and new entries.

1/14/12 23Source: Fifarek, Veloso and Davidson

Offshoring Manufacturing: g gLong-term Effects?

M f t iManufacturing moves overseas

Engineering work and R&D follow

Jeopardizing the ability of home economies to maintain economic growth and leadershipmaintain economic growth and leadership.

1/14/12 24Source: Fifarek, Veloso and Davidson

Neo Magnet Production:Neo Magnet Production:The Clock is Ticking

• Last neo production was in 2005 – Hitachi Edmore, Michigan plantHitachi Edmore, Michigan plant

• The longer the gap between the end of production and a restart the more difficultproduction and a restart, the more difficult the startup will be

Capital assets are gone– Capital assets are gone. – Human capital is drifting away

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What’s Happening Nowpp g• December 21, 2011

– Hitachi Announced New US Neo Magnet Plant • China Grove, NC

d i d f i d d• To produce sintered neo magnets from imported powder– Will not produce alloy

• At mass production capacity, will produce 40 tons/monthAt mass production capacity, will produce 40 tons/month• Built to service the automotive market

• Focus of mining efforts on Heavy Rare EarthsFocus of mining efforts on Heavy Rare Earths– Dysprosium

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The Bottom Line• Segments like the Loudspeaker Industry need a

di ifi d d h l h l h idiversified and healthy magnet value chain– Innovation in the industry depends on it.

• What can the Loudspeaker Industry do?– Buy local

• Innovation efforts will be enhanced by using a value chain that is close, can respond quickly, and is able to assist you with designwith design

– Compensate and reward for a secure, diversified value chain and not just the lowest costvalue chain, and not just the lowest cost

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Reference Information

• Ed Richardson – Thomas & Skinner • Phone: (317) 923-2501 • E-mail: erichardson@thomas-skinner comE mail: erichardson@thomas skinner.com• Website: www.thomas-skinner.com

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