On May 30, at the 2024 Rare Earth Industry Forum hosted by SMM, SMM Senior Analyst Liu Hao introduced the current status and outlook of China's NdFeB magnet industry.
Overview of the Rare Earth Industry Chain
NdFeB production is expected to continue rising in 2024, and company concentration will keep increasing.
As the largest producer of rare earth permanent magnets, China's production and consumption of rare earth permanent magnets have maintained a stable growth trend in recent years. In 2023, China's rare earth permanent magnet production was about 240,000 tons, up 14% YoY, and it is expected to reach 260,000 tons in 2024.
Zhejiang, as the largest NdFeB production base in China, has always played a leading role in the industry, with relatively high regional concentration ratio. However, the concentration of NdFeB companies is generally low, with the top 5 leading companies accounting for 17% of the capacity. It is expected that the concentration degree of NdFeB companies in China will further increase as the industry continues to mature in the coming years.
In 2023, due to changes in rare earth supply and demand and the slow recovery of the global economy, the rare earth market experienced fluctuations, facing issues such as upstream supply exceeding expectations, midstream overcapacity, and weak downstream demand, leading to a continuous decline in product prices. In Q1 2024, the prices of some rare earth products saw a sharp drop, with some products falling by more than 40% compared to the beginning of the year.
Material Prices Fell from Highs, NdFeB Prices Adjusted Downward
As of December 31, 2023, the price of NdFeB blank N35 was 140 yuan/kg, down from 305 yuan/kg at the beginning of the year, a cumulative decrease of 201 yuan/mt, a drop of 66%.
The sharp drop in magnet material prices led to a significant devaluation of machining scrap in magnet material factories, exacerbating the already low-profit caused by excessive competition.
Pr-Nd Market Supply and Demand Mismatch: Pr-Nd Alloy Prices Fell 38% in 2023
In 2023, the price trend of Pr-Nd alloy was mainly weak, falling from 872,500 yuan/mt at the beginning of the year to 540,000 yuan/mt, a total annual decline of 38%.
With downstream demand remaining weak and lacking cost support, rare earth prices continued to be under pressure at the beginning of 2024. Based on the Q1 2024 concentrate price of 20,737 yuan/mt from Northern Rare Earth, the cost of Pr-Nd oxide was about 370,000 yuan/mt, equivalent to a Pr-Nd alloy cost of about 440,000 yuan/mt. Based on the Q2 concentrate price of 16,792 yuan/mt, the cost of Pr-Nd oxide was about 320,000 yuan/mt, equivalent to a Pr-Nd alloy cost of about 460,000 yuan/mt.
High-Performance Magnet Steel "Reducing Dysprosium and Terbium" Led to a Decrease in Heavy Rare Earth Demand in 2023, with Terbium Oxide Prices Falling 47% Annually
In recent years, the demand for dysprosium and terbium has remained high due to the boom in high-performance magnetic materials. Starting in 2023, downstream magnet material manufacturers began adopting measures such as "reducing dysprosium and terbium" to lower the rare earth costs in their products, resulting in a decrease in the unit consumption of dysprosium and terbium in high-performance magnets.
Due to the relatively single supply channel for medium and heavy rare earths in China and the strong bargaining power of the group, the prices of some heavy rare earth products remained firm in the supply imbalance of 2023.
China's Rare Earth Mining Quotas Increased by 21.4% YoY in 2023, and the First Batch of Quotas in 2024 Increased by 12.5% YoY
In 2023, the Ministry of Industry and Information Technology and the Ministry of Natural Resources issued three batches of rare earth mining total control quotas, totaling 255,000 tons, an increase of about 21.4% YoY compared to 2022. The increase was entirely concentrated in the light rare earth segment, with a YoY increase of 23.58%, while the medium and heavy rare earth quotas remained flat with the past six years.
The growth rate of quotas in 2024 returned to a reasonable range, with the first batch of rare earth mining and smelting and separation total control quotas being 135,000 tons and 127,000 tons, respectively, up 12.5% and 10.4% YoY. In 2022-2023, the YoY growth rates of the first batch of mining product quotas were 20% and 19%, respectively, and the YoY growth rates of the first batch of separation quotas were 20% and 18%, respectively. This time, the growth rates of mining and smelting quotas were lower than in previous years, and the supply-demand balance of rare earths is expected to improve.
Significant Increase in Rare Earth Ore Imports in 2023: Unspecified Rare Earth Oxides Imports Up 206%, Mixed Rare Earth Carbonate Imports Up 882%
In 2023, China imported 66,414 tons of rare earth metal ore, down 14% YoY, with over 99% of the rare earth metal ore coming from the United States. The rare earth metal ore imported by China mainly comes from the MP mine in the United States, which is close to full production, and its output is unlikely to fluctuate significantly. The fluctuations in import volume are mainly affected by port logistics.
In 2023, China imported a total of 43,856 tons of unspecified rare earth oxides, up 206% YoY. These unspecified rare earth oxides mainly came from Southeast Asian countries such as Myanmar, Malaysia, Laos, and Vietnam. Although these regions are relatively rich in rare earth resources, their ore grades are lower compared to China's domestic ion-adsorption ores, and their mining and processing costs are relatively higher.
In 2023, China imported a total of 15,109 tons of mixed rare earth carbonate, a YoY increase of 882%. These rare earth resources mainly come from Malaysia. On September 11, 2023, Malaysian Prime Minister Anwar Ibrahim stated that Malaysia would formulate a policy to ban the export of rare earth raw materials to prevent the unlimited exploitation and export of these strategic resources, and it is expected that the import volume of these rare earths will decrease in the future.
China's Magnetic Material Exports Continued to Be Under Pressure in 2024: Cumulative Export Volume Down 3.2% YoY from January to April
Taking permanent magnets as an example, China exports permanent magnets to a wide range of countries. From January to April, permanent magnets were exported to 104 countries and regions, with the top three export destinations being Germany (3,359 tons), the United States (2,202 tons), and South Korea (1,936 tons).
Geopolitical Impact on Rare Earth Permanent Magnet Exports
Japan, as the second-largest producer of magnetic materials, accounts for about 10-15% of the production. The recent U.S. tariffs on China are expected to benefit other magnetic material-producing countries.
Mountain Pass plans to start producing magnets in Fort Worth, Texas, aiming to achieve commercial production of finished magnets by the end of 2025. Currently, MP has a rare earth oxide production capacity of 43,000 tons per year in the United States, providing sufficient raw materials to support future production expansion.
High Growth in NEV Demand for Rare Earths in 2023, with Growth Rate Slowing to 20% from 2024 to 2027
According to data from the China Association of Automobile Manufacturers, in 2023, the production and sales of NEVs reached 9.587 million and 9.495 million units, respectively, up 35.8% and 37.9% YoY, with a market share of 31.6%. The NEV market in 2024 faces certain structural pressures in demand. According to the classification of the three major purchasing groups (taxi, unit, and private) from national insurance data, the taxi and ride-hailing market is nearing saturation; the demand for pure electric and plug-in hybrid models in the unit market is gradually stabilizing; and the market share of NEVs in cities with purchase restrictions is declining, while the share of high-end group purchases in large cities is decreasing, and the sales share in small and medium-sized cities and county markets has already increased significantly. Therefore, given the current market scale, the growth rate is expected to slow down.
Onshore Wind Power Projects in the Three North Regions Successfully Connected to the Grid: Domestic New Wind Power Installed Capacity Up 83.8% YoY in 2023
According to data from the National Energy Administration, in 2023, the newly installed wind power capacity nationwide was 72.28 GW, up 95.6% YoY, consuming a total of 3,844 tons of Pr-Nd alloy, equivalent to 4,613 tons of Pr-Nd oxide.
Currently, China's wind power generation is mainly based on onshore wind power. Rare earth permanent magnet wind turbines have excellent power generation efficiency, reliability, and low operation and maintenance costs, making them an ideal choice for energy conservation and emission reduction. The new scale of over 75 GW in 2023 was due to the concentrated grid connection of large onshore wind power base projects, with wind power projects in the "Three North" regions (Inner Mongolia, Qinghai, etc.) achieving partial or full capacity grid connection in 2023.
China's Air Conditioner Production Up 11% YoY in 2023: Difficult to Maintain High Growth in Air Conditioner Production
With the return of external economic order, the early marketing promotion rhythm of brand owners, and the addition of high-temperature weather, the demand for air conditioners was concentrated in the first half of 2023, with the retail scale of the air conditioner market increasing by 19.5%. This data pushed the attention of the air conditioner market to its peak and raised market expectations to a high level. However, entering Q3, the market faced significant growth pressure due to the high base of the same period and the overdraft of previous demand, with air conditioner production down 15.7% YoY in Q3.
According to data from the NBS, in 2023, China's air conditioner production reached 247.738 million units, up 11% YoY, consuming a total of 5,483 tons of Pr-Nd alloy. Under the combined influence of El Niño and global warming, temperatures in most parts of China are expected to be higher in 2024, with sustained high temperatures in North China, South China, and the southern part of Jiangnan. The high-temperature impact in South China and Jiangnan is expected to be more severe than in 2023, and the demand for air conditioners is expected to continue increasing in 2024.
China's Elevator, Escalator, and Lift Production Reached 1.548 Million Units in 2023: Weak Real Estate Market Makes It Difficult for the Elevator Industry to Maintain High Growth
According to the latest data from the NBS, in 2023, China's production of elevators, escalators, and lifts reached 1.548 million units, up 5% YoY, bringing a total demand of 2,630 tons of Pr-Nd alloy.
The elevator industry is highly correlated with the real estate industry, and the development of the real estate market directly impacts the elevator industry. Due to the difficulties faced by real estate companies in recent years, the continuous decline in new land prices, and the difficulty of policies such as old house renovation in supporting high growth in the elevator industry, the real estate market continued to be weak in January-February 2024, with new commercial housing construction area at 94.28 million square meters, down 37% YoY. The future demand for rare earths from the elevator sector is not optimistic.
With the Slowing Growth of Domestic NEVs, Rare Earth Supply Surplus Gradually Forms
Finally, he also introduced the distribution of overseas rare earth mining projects and overseas rare earth oxide separation projects.
