What Causes Volatility in the Cost of Rare Earth Magnets?

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Why did rare earth magnet prices increase in 2021 and 2022?

A variety of factors can affect rare earth magnet production costs causing price fluctuations. A combination of factors, including China’s climate-related policies, surging energy demands, and the COVID-19 pandemic, has created volatility in the production costs of rare earth magnets.

The past several years have seen a unique set of circumstances converge in China, who is the largest supplier to the the international rare earth metals market.

China’s Climate Policy

China has adopted strict anti-pollution policies and enforces them through a variety of measures, including domestic pollution control alerts that can disrupt manufacturing operations. The government assigns designation levels for pollution in every province. When these levels are reached, the state may shut down manufacturing operations.

China’s Coal Production Issues

Coal-fired power is currently responsible for more than half the China’s power needs; however, the state has recently adopted a goal of being carbon neutral by 2060. In pursuit of this goal, coal production has been cut resulting in government-controlled energy prices soaring, which increases manufacturing costs.

In a country that is 70 percent fossil fuel reliant, reduced production to conserve energy quickly affects the production, and therefore the price of materials such as rare earth metals.

Electricity Shortages

China’s challenge of meeting electricity demand during peak consumption periods has also been an ongoing issue for manufacturers. China frequently deals with electricity supply shortages, resulting in recent government-mandated rolling blackouts, which can slow or halt operations. The increasing demand for more consumer products worldwide has exacerbated this situation.

COVID-19 Pandemic

The pandemic has created greater energy demand at a time when blackouts, rising energy costs, and climate-control policies have already led to decreased production levels.

In addition, products that require rare earth magnets are in greater demand globally – including electric vehicles, drones, wind turbines, audio headphones, computer hard drives, cordless tools, and other consumer products.  

Some production has been shut down due to COVID outbreaks, while in other cases, the demand the pandemic created has outpaced China’s ability to keep up with domestic power production requirements.

Reach Out to Dura Magnetics for Help

You can count on Dura Magnetics as your expert domestic supplier for stock magnets, custom magnets, and magnet assemblies.

We follow the magnet industry closely and  work  to keep you up to speed on international developments that can affect your sourcing of these products.

When sourcing rare earth magnets, encountering price increases, or facing increased lead times, we encourage you to reach out to your Dura Magnetics sales representative with questions or concerns regarding your product needs. Our team understands current market conditions, and we will work with you to ensure you have all the information you need when purchasing rare earth magnets.