One week after the China-U.S. dialogue, the domestic magnetic material market: short-term pain coexists with accelerated transformation [SMM Analysis]

I. Sino-US London Framework Review: A Window of Relief for the Magnetic Material Supply Chain

According to the negotiation results disclosed by China's Ministry of Commerce on June 10, rare earth and critical mineral supply was listed as one of the three core issues, with the US explicitly stating that "if the framework is approved, the issues regarding rare earths and magnets could be resolved." The agreement sends two major signals:

Easing of Resource CompetitionChina's rare earth export policies may return to a market-oriented track, reducing the magnetic material supply chain risks for high-end manufacturing in the US (NEVs, wind power);

Probing into Technology ExchangeThe US might relax export restrictions on magnetic material production equipment and high-end coating technologies to China in exchange for stable supplies of heavy rare earths (Dy/Tb).

II. Current Domestic Market Situation: Three Pressures Behind the Quiet Trading

Despite the policy breakthrough, the spot market for magnetic materials remains in a "quiet trading" deadlock:

Short-term Shrinkage of Export Orders

Some US buyers have postponed orders due to tariff uncertainties (current average rate 42%), with magnetic material enterprises reporting that orders in June generally fell short of expectations;

European customers are demanding price cuts to share potential tariff costs, squeezing profit margins.

Pervasive Wait-and-See Sentiment Across the Industry Chain

Rare earth raw material procurement has become more cautious, with magnetic material factories proactively lowering days of raw material inventories;

Downstream motor companies are delaying their purchasing plans, awaiting the outcome of high-level consultations in October.

Worsening Overcapacity in Low-End Production Intensifies Cut-Throat Competition

Ferrite magnet producers' operating rates continue to decline, with small and medium-sized enterprises embroiled in price wars, leading to a general reduction in NdFeB blank prices.

III. Forced Transformation: The Breakthrough Logic of Top-Tier Enterprises

The industry's painful period has instead catalyzed structural upgrades among magnetic material leaders:

Expansion of High-End Capacity→JL MAG Rare-Earth's Baotou base commences operations (20,000 mt of high-performance capacity)→Application of Grain Boundary Diffusion (GBDP) technology

Resource Autonomy→Zhong Ke San Huan establishes a joint venture with south China rare earth companies→Increasing substitution ratio of Ce for Pr-Nd

Green Manufacturing Upgrade→Zhenghai Magnetic Material launches phosphating lines to replace electroplating→Reducing heavy metal wastewater discharge

Exploring Non-US Markets→DMEGC actively expands into EU and Southeast Asian markets→Achieving IATF 16949 certification in the automotive industry

IV. Foundations for Future Cooperation: Playing the Technology Card and Reshaping the Supply Chain

Whether Sino-US magnetic material trade can truly break the ice depends on two core conditions:

Mechanism for Equivalent Technology Exchange

If the US lifts export restrictions on sputtering coating and hot isostatic pressing equipment for magnetic materials, China may open up patent licensing for high-abundance Ce magnets;

Construction of a Closed-Loop Supply Chain

Increasing the proportion of recycled rare earth raw materials (e.g., from scrap motors) to 30% (currently less than 10%), reducing dependence on raw ore; Establishing a cross-border traceability system to meet the US "supply chain transparency" requirements.

Conclusion: Breaking the Deadlock and Reshaping – A New Game in the Magnetic Material Industry

The China-U.S. London Framework serves as a short-term "painkiller," temporarily alleviating the crisis of a disrupted rare earth magnetic material supply chain, yet failing to eliminate the pain caused by structural contradictions. The current market downturn is not only a stress response to external uncertainties but also an inevitable process of deep industry reshuffling.

When the October Washington consultations commence, the bargaining chips presented by China's magnetic material industry will not only be rare earth capacity but also a comprehensive competitiveness comprising a pool of process patents, green manufacturing standards, and a renewable resource system. The outcome of this great power game will not be determined at the negotiation table but rather by technological innovation and industry chain control, evident in the precise temperature control of enterprise grain boundary diffusion furnaces, the continuous rolling sounds of nanocrystalline strips, and the traceability chains of cross-border recycling networks.

The next destination for China's magnetic material industry is to reshape the rules at the top of the global value chain.