With the further implementation of protection measures and the continuous increase in prices, rare earths, which are known for their industrial flavour and exquisite reputation, are gradually returning to the standard of strategic resources. The past days of humiliation and low sales may no longer return.

　　Since the beginning of 2011, the price of major rare earths has increased by more than five times.

　　As a country with large rare earth reserves, China has experienced a long-term process of re-understanding the strategic resources of rare earths.

　　In the context of a powerful country in science and technology and economic transformation, the country limits the export of rare earths on the one hand, and encourages the rapid development of new rare earth materials and rare earth application products. As an important part of magnetic materials, NdFeB magnets have become the mainstream products of high-end magnets. China's NdFeB industry accounts for more than 80% of global output, and its output value exceeds 60%.

　　Along with the sharp increase in the price of rare earths, the open market price of NdFeB is on the rise. NdFeB manufacturers are currently almost 100% transferred from the cost pressure, and become the beneficiaries of the industry chain.

　　In the context of "energy saving and emission reduction", industries such as wind power generation, new energy vehicles and energy-saving home appliances have developed rapidly, directly driving the demand for NdFeB products. On the premise of long-term optimism about the price of rare earths, NdFeB manufacturers are also optimistic about their ability to transfer costs.

　　Change the relationship between upstream and downstream supply and demand

　　So far, China's rare earth industry has experienced nearly 50 years of development. From 1985, China began to implement the export tax rebate policy for rare earth products until 1998. China implemented a rare earth product export quota license system and included rare earth raw materials in the catalog of prohibited commodities for processing trade. Even in 2000, China began to implement a rare earth mining quota system, reflecting the country’s re-understanding of rare earth strategic resources.

　　In order to reflect its important strategic position and completely change the problem of cheap export of products, since 2007, the country has adjusted its rare earth production plan from guiding to mandatory. After 2005, rare earth management policies were intensively promulgated. Especially since 2011, the government has vigorously rectified the chaos in the rare earth industry from the "Rare Earth Industry Pollutant Emission Standards" to the "Several Opinions of the State Council on Promoting the Sustainable and Healthy Development of the Rare Earth Industry."

　　In accordance with the "Several Opinions of the State Council on Promoting the Sustained and Healthy Development of the Rare Earth Industry", in accordance with the relevant policies restricting the export of "two high and one asset" products, while strictly controlling the total amount of rare earth mining and production, strictly controlling rare earth metals, oxides, and salts For the export of primary products such as rare earth and rare earth ferroalloys, restrictions on mining, production, consumption and export should be implemented simultaneously. Overall consideration of domestic resources, production, consumption, and international market conditions, rationally determine the total annual rare earth export quotas.

　　As an important strategic resource, rare earth has received increasing attention from the country. Based on the consideration of the sustainable and healthy development of the rare earth industry, the State Council issued a document in May this year to clarify the industry development goal, that is, in 1-2 years, establish a standardized and orderly rare earth resource development, smelting separation and market circulation order, and resource disorderly mining, The blind expansion of production has been effectively curbed, and the pattern of the rare earth industry dominated by large enterprises has basically formed. Improve the management of rare earth mandatory production plans, establish rare earth resource reserves, and vigorously develop rare earth application industries.

　　In the context of industry restrictions on production and export restrictions, the domestic rare earth production system has undergone a major flexion, and prices have shown explosive growth. The price of major rare earths has risen more than 5 times since the beginning of the year.

　　In the context of a powerful country in science and technology and economic transformation, the country restricts the export of rare earths on the one hand, and encourages the rapid development of new rare earth materials and rare earth application products. In order to promote the technological progress of the domestic rare earth material system, the State Council issued the "Decision on Accelerating the Cultivation and Development of Strategic Emerging Industries" in October 2010, clarifying the vigorous development of new materials such as rare earth functional materials and elevating rare earth functional materials to a strategic height.

　　As an important part of magnetic materials, NdFeB has the characteristics of high magnetic energy product, high coercivity, high remanence, etc., and has become the mainstream product of high-end magnetic materials.

　　China's high-performance NdFeB permanent magnet materials have shown a rapid growth trend in the past ten years. In terms of global proportion, China has exceeded 80% of the world's total output and 60% of its output value. Whether in terms of output or output value, Europe and the United States account for only 1%-2%. Japan, as China's largest exporter of rare earths, is bound to accelerate the transfer of downstream rare earth production capacity to China based on the substantial adjustment of China's rare earth policy. Coupled with the expiration of formula patents in 2014, the rapid development of China's rare earth materials industry, especially the high-end rare earth industry, will be an inevitable trend.

　　The cost structure of NdFeB includes material cost, energy cost and a small amount of labor cost. Among them, the material cost accounts for 70%-80% of the overall cost.

　　In the composition of material costs, rare earth metals or alloys such as neodymium, neodymium praseodymium, and dysprosium iron account for more than 90%.

　　As the price of rare earth continues to rise, its impact on the cost of NdFeB has become increasingly prominent.

　　The ability to transfer prices continues to increase

　　Since the price of rare earths rose sharply in 2011, the open market price of NdFeB has basically shown a trend of simultaneous increase. This correlation shows that, so far, NdFeB manufacturers have almost 100% transferred cost pressure. The reasons why 100% can be passed on to downstream customers are as follows:

　　1) In terms of product functional characteristics, rare earth permanent magnets have the characteristics of high remanence, high coercivity, and high magnetic energy product, which surpass other existing magnetic materials in performance. Rare earth permanent magnets also have the advantages of high energy density, which makes it possible to miniaturize, lighten, and thin equipment such as instrumentation, electroacoustic motors, and magnetic separation and magnetization. 2) From the perspective of application trends, rare earth permanent magnets are irreplaceable in their core areas. Although ferrite is still the most used magnetic material, the production value of neodymium iron boron magnets has surpassed ferrite permanent magnet materials in 2000. In a variety of strong electric fields, NdFeB is still irreplaceable. 3) From the perspective of manufacturers, high-performance NdFeB manufacturers are relatively concentrated. The full order volume shows that downstream demand has not shrunk due to price changes.

　　There are three possible changes in the price of rare earths. Under different price changes, they may have the following effects on the price of NdFeB and the relationship between supply and demand.

　　First, prices continued to rise and set new highs during the year. Based on this judgment, NdFeB manufacturers may 1) continue to adopt a high inventory strategy. 2) According to the matching cost situation, increase the shipping price accordingly. 3) As far as the financial impact is concerned, it will help increase the business income and gross profit margin of related companies. However, the possible negative impacts are 1) Some downstream industries and companies may not be able to withstand the pressure of continued price increases, and it is not ruled out that the consideration of reducing the scale of procurement is not ruled out. 2) Some cost-sensitive manufacturers may turn to the research and development of ferrite magnetic material technology system to replace NdFeB.

　　Second, prices have fallen in the short-term, but are still higher than the average prices in the two quarters, and maintain a long-term upward trend. Based on this judgment, NdFeB manufacturers may 1) appropriately reduce inventories in the short term to reduce the impact of rare earth price adjustments on the company's inventory. 2) Because the price is optimistic in the long-term, manufacturers will continue to expand production capacity to meet the needs of new downstream applications. 3) In terms of financial impact, short-term revenue and gross profit margin remained relatively stable. The emergence of this situation may affect the procurement progress of downstream manufacturers of magnetic materials, but it will not change the mainstream pattern of downstream applications of rare earth permanent magnets in the long term.

　　Third, prices have fallen sharply on the current basis, falling below the average price of the two quarters. Then 1) NdFeB manufacturers have asset impairment risk. 2) NdFeB customers may reduce their inventory due to huge fluctuations in material prices. 3) NdFeB manufacturers will suffer short-term financial losses, and their revenue and gross profit margin will be affected.

　　The emerging application space continues to expand

　　VCM, mobile phones, and consumer electronics are the traditional demand markets for NdFeB. Among them, TDK alone, its annual demand for NdFeB is close to 4,000 tons. As the world's largest mobile phone production base, the domestic mobile phone demand for high-performance NdFeB is steadily increasing. In 2010, the domestic production of mobile phones was 998 million units, corresponding to the demand for high-performance NdFeB permanent magnet materials of approximately 2500 tons. The annual demand for high-performance NdFeB permanent magnet materials for consumer electronics, including DVD players and optical disc drives, exceeds 1,500 tons.

　　In addition to being widely used in traditional electronic information fields such as mobile phones, PCs, and audio, NdFeB is also making great progress in new fields such as new energy, energy saving and environmental protection. In the context of "energy saving and emission reduction", the rapid development of industries such as wind power generation, new energy vehicles and energy-saving home appliances has also directly driven the demand for NdFeB products.

　　As a clean and sustainable energy, wind energy is becoming an important part of many countries' energy sustainable development strategies. According to statistics from the Global Wind Energy Council, the global wind development industry has an average annual growth rate of 28%. From the perspective of wind turbine technology, direct drive permanent magnet wind turbines have become an important development direction of wind power technology due to their high power generation efficiency, long life, high stability, and simple structure. According to the “Twelfth Five-Year Plan”, the total newly installed capacity from 2011 to 2015 will exceed 250 million kilowatts. If 50% of them are direct-drive permanent magnet wind turbines, the corresponding number of new units will be 75,000, and the use of sintered NdFeB materials will exceed 75,000 tons.

　　As the environmental protection measures of countries around the world become more and more stringent, new energy vehicles are receiving widespread attention for their energy-saving and environmentally-friendly features. Relevant Chinese authorities began to conduct demonstration and promotion of new energy vehicles in some regions in 2009. In this context, domestic hybrid vehicles have entered a stage of rapid development.

　　According to third-party estimates, during the 12th Five-Year Plan period, the cumulative number of new hybrid vehicles in the country will exceed 8 million. Based on the calculation that each hybrid car motor needs about 5KG of high-performance NdFeB permanent magnet materials, by 2014, the demand for high-performance NdFeB of hybrid cars will reach 7,500 tons.

　　Among home appliances, air conditioners are products with a higher energy consumption ratio. The popularity of inverter air conditioners in developed countries is very high. In Japan, inverter air conditioners account for 97% of their total air conditioners. Although China's air conditioner output has exceeded 100 million units, the current output of inverter air conditioners is only 24 million units. Rare-earth permanent magnet inverter motors account for about 50% of inverter air conditioners.

　　With the country's increasing and mandatory implementation of the standard for inverter air conditioners, it is expected that in the next five years, China's inverter air conditioners will maintain a compound growth rate of more than 30%.

　　Elevators are one of the largest energy-consuming equipment in high-rise buildings. China has become the world's largest elevator manufacturing base, the largest elevator market, and the world's second largest elevator ownership country. Energy-saving elevators using permanent magnet synchronous traction machines will be the future development direction of the elevator industry.

　　In addition, rare earth permanent magnet materials are also in large demand in the fields of medical treatment, robotics, and CNC machine tools. As the NdFeB component = sub-patent expires in 2014, overseas markets will become an important market for domestic permanent magnet material manufacturers.