30 Years of Great Changes: China NdFeB Strategic Road
Rare earth permanent magnet material is the third generation permanent magnet material successfully developed after metal system and ferrite system. Since its inception in the 1960s, it has been developing rapidly and can be divided into four generations according to the time sequence of its development and application: the first generation is SmCo5 series materials; the second generation is Sm2Co17 series magnets; the third generation rare earth permanent magnets are in the early 1980s. The successfully developed NdFeB (NdFeB) series of magnetic materials; the fourth generation is rare earth iron nitrogen (Re-Fe-N series) and rare earth iron carbon (Re-Fe-C series).
The advent of NdFeB permanent magnets has injected new vigor and vitality into the rare earth high-tech field. NdFeB magnets have a high magnetic energy product and are regarded as the irreplaceable “king of permanent magnets” in the next 20 years. They are widely used in electronics, machinery and other industries with their excellent performance.
Difficult start, troubled patent office
The development of NdFeB in my country is divided into three stages: from 1983 to 1996, it mainly followed the development of foreign technologies; from 1996 to 2005, it solved the problem of large-scale production and started industrial mass production; Utilization and material serviceability issues.
However, this road to industrialization is not smooth. When going from the primitive era to intensive production and exploring the international market, the first thing that cannot be avoided is the patents that have already been deployed abroad.
It is reported that Hitachi Metals has more than 600 patents around the world, and almost monopolizes all patents from NdFeB composition to sintered NdFeB production process.
On August 17, 2012, Hitachi Metals of Japan and Hitachi Metals North Carolina, a sintered NdFeB magnet factory established in the United States, applied to the U.S. International Trade Commission (ITC), including 4 NdFeB companies in China. 29 companies around the world launched the “337 Survey”.
At that time, there were more than 200 NdFeB production enterprises in my country, and nearly 30 enterprises with an annual production capacity of more than 1,000 tons. However, the only Chinese companies that have Hitachi Metal’s patent license are Zhongke Sanhuan, Ningbo Yunsheng, Antai Technology, Beijing Jingci, Beijing Yinna, Yantai Zhenghai, Ningbo Jinji and Anhui Dadixiong.
The NdFeB market is characterized by segmentation, and the domestic market is dominated by low-end demand. The overseas market is dominated by mid-to-high-end demand, but only companies with patent authorization can enter.
In 2014, China NdFeB output was about 80,000 tons, of which about 20,000 tons were licensed by patents. Of the remaining 60,000 tons, 30,000 to 40,000 tons were digested in the domestic market. The remaining 20,000 to 30,000 tons cannot be sold to foreign high-end markets due to patent restrictions, and NdFeB enterprises have suffered huge losses.
Previously, most enterprises rely on enterprises with the right to use patents to export. These businesses need to pay some fees to export by changing the product labels.
If most of China’s NdFeB companies are “blocked” by Hitachi Metal’s patent rights, there will be eight domestic monopolies. “Powerless” enterprises face severe tests of their right to survival and sharply reduced market share.
In fact, “powerful” companies have also paid a high price. Zhongke Sanhuan has obtained the patent authorization of the Japanese NdFeB enterprise since 1993. In addition to the threshold fee for the first patent authorization, it also pays patent royalties every year according to product sales.
According to industry public data, in the first half of 2012, the revenue of Zhongke Sanhuan was 2.845 billion yuan, and the net profit was 461 million yuan, of which overseas income was 1.484 billion yuan. The patent royalties paid by Zhongke Sanhuan in the current period amounted to 25.26 million yuan, accounting for 5.5% of its total net profit.
In other words, Zhongke Sanhuan will pay 5.5 yuan in patent fees for every 100 yuan it earns. Similarly, Ningbo Yunsheng’s patent royalties in the first half of 2012 also reached 2.52 million yuan.
The development of the matter here, the Chinese NdFeB enterprise, which has been in a passive situation all the year round, is determined to break the patent blockade of Hitachi Metals.
In 2014, according to Sun Baoyu, chairman of Shenyang Zhongbei Magnetics, after more than a year of analysis and review, the Rare Earth Permanent Magnet Alliance found that more than 100 U.S. patents of Hitachi Metals could not all stand. The process route taken by China’s NdFeB is different from that of Hitachi Metals.
In view of Hitachi Metal’s market monopoly behavior, the Alliance launched an anti-monopoly investigation against Hitachi Metal in the Chinese market. At the same time, the three core patents in the process patent of Hitachi Metal applied to the US Patent Office in the United States were invalid.
At the same time, the 7 core enterprises in the alliance also conduct research and development and improvement on the product production process and related equipment of the alliance enterprises, and apply for patents for core technologies, forming a complete set of alliance processes with independent intellectual property rights. As of August 2014, the alliance companies have applied for more than 130 patents, including patents in the United States and other countries.
So far, China’s NdFeB enterprises have finally started to slowly rise.
Relying on volume competition, but deeply trapped in the low-end market
In late May, with the closure of Tengchong, Myanmar’s rare earth mines could not be imported into the country, and the price of medium and heavy rare earths began to rise continuously.
In early June, after the National Development and Reform Commission organized three meetings in two days, it urgently issued the “Notice on Conducting Research on Strategic Mineral Resources such as Rare Earths”.
Under these continuous actions, rare earth concept stocks are green. However, unlike previous years, the increase in rare earth permanent magnets in the rare earth downstream sector even exceeds that of rare earths. There was even a daily limit for several stocks in one day, and the total market value of the entire sector increased by 35.86 billion yuan a day.
Since 2010, there have been three relatively large structural opportunities in the A-share rare earth sector, and rare earth stocks have emerged one after another. However, judging from the data of previous years, upstream rare earths are resource-based, with obvious scarcity. Funds prefer upstream rare earth resource stocks, and the increase is far ahead of downstream permanent magnets. Why is the market favoring downstream this year?
According to relevant sources, it may be that the downstream market of rare earths is closer to new energy and new materials, and has more growth potential.
In this way, it seems that the vigorous development of the NdFeB industry in recent years is the reassurance for these concept stocks to become popular? However, the popular stock market did not tell you another truth. Compared with the international market, China NdFeB has a large disadvantage at the low end.
Benefiting from the advantage of rare earth reserves, the scale of China’s NdFeB industry ranks among the top in the world.
In 2000, my country’s NdFeB magnet output surpassed Japan’s, becoming the world’s largest NdFeB magnet producer; from 2000 to 2015, China’s NdFeB production average annual compound growth rate was as high as about 25%; in 2015, my country’s NdFeB magnet production The boron output is 127,000 tons, accounting for about 90% of the global total.
On the other hand, after 30 years of development, my country’s NdFeB magnet industry has formed a complete industrial system.
CICC reported that China has a complete industrial chain from rare earth mineral products – separation products – rare earth permanent magnets. In 2016, my country’s rare earth permanent magnets accounted for 82% of the global share.
Whether in terms of annual output or market share, Chinese aluminum-iron-boron companies seem to have finally won the international status they deserve as a rare earth power.
But what is embarrassing is that despite the large output of rare earth permanent magnets in my country, there is still a big gap compared with Japan and Germany in terms of production efficiency, degree of automation, and product yield. In addition, the bulk of my country’s NdFeB products is low-end, and the proportion of high-performance NdFeB materials is relatively low.
In recent years, about 75% of NdFeB in my country has been used in traditional fields such as electro-acoustic devices, magnetic separation, and consumer electronics, while only 1/4 in new application fields such as inverter air conditioners, new energy vehicles, and energy-saving elevators.
As a national strategic material, being deeply involved in the low-end market seems to mean huge room for growth, but how to cut into the high-end market is also full of challenges.
Actively deploy new energy to seize the high-end market
It is reported that at present, 60% of the demand for high-end NdFeB is used in automobiles, and the demand for rare earth permanent magnets in automobiles has an obvious pulling effect.
In order to change the passive situation of my country’s rare earth permanent magnet enterprises in the high-end market, relevant industry associations and enterprises are actively seeking changes.
On January 5, 2018, China Association of Automobile Manufacturers and China Rare Earth Industry Association jointly held the establishment meeting of the upstream and downstream cooperation mechanism of rare earth permanent magnet materials for new energy vehicle drive motors. BAIC New Energy, Yutong Bus, Geely Automobile, BYD Automobile, Northern Rare Earth , Xiamen Tungsten Industry, Harbin Institute of Technology and other representatives of more than 20 units attended the meeting.
At the meeting, Li Wei, director of the Department of Raw Materials Industry, immediately pointed out that drive motors are the “heart” of new energy vehicles, and rare earth permanent magnet materials are the preferred materials for drive motors.
At the same time, the leading enterprises in China’s rare earth permanent magnet industry directly use real money to enter high-end applications such as motors and new energy. (The following information comes from the respective announcements of the relevant companies)
As early as 2015, Zhenghai Magnetics acquired an 88.68% stake in Shanghai Dajun, a leading domestic supplier of motor drive systems. Then on April 12, 2017, it invested 500 million to build a high-performance low-heavy rare earth permanent magnet production base for new energy vehicles.
In 2018, Zhongke Sanhuan raised funds for the “Beijing New Energy Vehicles and Energy-Saving Home Appliances High-performance Rare Earth Permanent Magnet Materials Technical Transformation and Production Expansion Project”. After the project is completed and put into production, an additional output of 1,000 tons of sintered NdFeB blanks for energy-saving home appliances will be added. /year, the newly added sintered NdFeB blank for new energy vehicles is 800 tons per year.
And Ningbo Yunsheng has created an industrial cluster based on new materials, new energy and mechatronics through a series of mergers and acquisitions.
These leaders seem to be revealing a signal that my country’s rare earth enterprises are gradually getting rid of the label of “resource exporting” and turning to “high-tech manufacturing”.
At the beginning of the year, according to the website of the Ministry of Industry and Information Technology, the development trend of my country’s rare earth permanent magnet industry is gratifying. In 2018, new energy vehicles, energy-saving home appliances, power tools, industrial robots and other industries have provided important support for the development of the rare earth permanent magnet material industry.
After 30 years of hard work, China’s NdFeB enterprises have finally gradually lost the label of “resource exporting” and gradually developed into a national strategic industry.