Notice2023-03078
Publication of a Report on the Effect of Imports of Neodymium-Iron-Boron (NdFeB) Permanent Magnets on the National Security: An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, as Amended
Primary source
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Published
February 14, 2023
Issuing agencies
Commerce DepartmentIndustry and Security Bureau
Abstract
The Bureau of Industry and Security (BIS) in this notice is publishing a report that summarizes the findings of an investigation conducted by the U.S. Department of Commerce (the "Department") pursuant to section 232 of the Trade Expansion Act of 1962, as amended ("section 232"), into the effect of imports of neodymium-iron-boron (NdFeB) permanent magnets on the national security of the United States. This report was completed in June 2022 and posted on the BIS website in September 2022. BIS has not published the appendices to the report in this notification of report findings, but they are available online at the BIS website, along with the rest of the report (see the ADDRESSES section).
Full Text
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<title>Federal Register, Volume 88 Issue 30 (Tuesday, February 14, 2023)</title>
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[Federal Register Volume 88, Number 30 (Tuesday, February 14, 2023)]
[Notices]
[Pages 9430-9475]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-03078]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
RIN 0694-XC081
Publication of a Report on the Effect of Imports of Neodymium-
Iron-Boron (NdFeB) Permanent Magnets on the National Security: An
Investigation Conducted Under Section 232 of the Trade Expansion Act of
1962, as Amended
AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Publication of a report.
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SUMMARY: The Bureau of Industry and Security (BIS) in this notice is
publishing a report that summarizes the findings of an investigation
conducted by the U.S. Department of Commerce (the ``Department'')
pursuant to section 232 of the Trade Expansion Act of 1962, as amended
(``section 232''), into the effect of imports of neodymium-iron-boron
(NdFeB) permanent magnets on the national security of the United
States. This report was completed in June 2022 and posted on the BIS
website in September 2022. BIS has not published the appendices to the
report in this notification of report findings, but they are available
online at the BIS website, along with the rest of the report (see the
ADDRESSES section).
DATES: The report was completed in June 2022. The report was posted on
the BIS website in September 2022.
ADDRESSES: The full report, including the appendices to the report, are
available online at <a href="https://bis.doc.gov/232">https://bis.doc.gov/232</a>.
FOR FURTHER INFORMATION CONTACT: For further information about this
report contact Erika Maynard, Special Projects Manager, (202) 482-5572;
and Leah Vidovich, Management and Program Analyst, (202) 482-1819. For
more information about the Office of Technology Evaluation and the
section 232 Investigations, please visit: <a href="http://www.bis.doc.gov/232">http://www.bis.doc.gov/232</a>.
SUPPLEMENTARY INFORMATION:
The Effect of Imports of Neodymium-Iron-Boron (NdFeb) Permanent Magnets
on the National Security
An Investigation Conducted Under Section 232 of the Trade Expansion Act
of 1962, as Amended
U.S. Department of Commerce Bureau of Industry and Security Office of
Technology Evaluation
Table of Contents
1. Executive Summary
1.1 Findings
1.2 Determination
1.3 Recommendations
2. Legal Framework
2.1 Section 232 Requirements
2.2 Discussion
3. Investigative Process
3.1 Initiation of Investigation
3.2 Public Comments
3.3 Information Gathering and Data Collection Activities
3.4 Interagency Consultation
4. Product Scope of the Investigation
5. NdFeb Magnet Production
5.1 Production Process and Value Chain Steps
5.2 Rare Earth Element Losses in Magnet Production
6. U.S. NdFeB Magnet Industry
6.1 Historical Overview
6.2 U.S. Demand
6.3 NdFeB Magnets in Defense and Critical Infrastructure
Applications
6.3.1 Defense Applications
6.3.2 U.S. Government Actions To Reduce Defense Dependencies
6.3.3 NdFeB Magnets, Climate Change, and the National security
6.3.4 Electric Vehicles
6.3.5 Wind Energy
6.4 U.S. Trade in NdFeB Magnets
6.5 Duties on NdFeB Magnet Imports
7. Global NdFeB Magnet Industry
7.1 Global Demand
7.2 Global NdFeB Magnet Value Chain
7.3 Russia and the NdFeB Magnet Industry
8. Status and Forecast of the U.S. NdFeB Magnet Industry
8.1 U.S. Production of NdFeB Magnets and Components, 2017 to
2026
8.1.1 Firm Participation in the U.S. NdFeB Magnet Value Chain
8.1.2 Production of NdFeB Magnets and Magnet Components, 2017 to
2026
8.1.3 Company Profiles
8.1.4 Estimated NdFeB Magnet Import Penetration, 2017 to 2026
8.2 Requirements to Establish the U.S. NdFeB Magnet Industry
8.2.1 Facility Costs and Capital Expenditures
8.2.2 Critical Equipment
8.2.3 Employment
8.3 Additional Challenges to Domestic Production
8.3.1 Import Competition, Production Costs, and General
Challenges
8.3.2 Environmental Factors
8.3.3 Intellectual Property
8.3.4 Prices and Price Volatility
8.4 Recycling and Substitution
8.4.1 NdFeB Magnet Recycling
8.4.2 NdFeb Magnet Substitutes
9. Conclusion
9.1 Findings
9.1.1 NdFeB Magnets Are Essential to U.S. National Security
9.1.2 Domestic Demand for NdFeB Magnets Is Expected To Grow
9.1.3 The United States and Its Allies Are Dependent on Imports
From China
9.1.4 The United Sates Will Continue To Depend on Imports
9.1.5 The U.S. NdFeB Magnet Industry Faces Significant
Challenges
9.2 Determination
9.3 The United States Should Not Restrict NdFeB Magnet Imports
9.4 Recommendations
9.4.1 Engagement With Allies and Partners
9.4.2 Bolster Domestic Supply
9.4.3 Bolster Domestic Demand
9.4.4 Support Medium- to Long-Term Industry Development and
Resiliency
9.4.5 Continue To Monitor the NdFeB Magnet Value Chain
Appendices
Appendix A: Section 232 Investigation Notification Letter to
Secretary of Defense Lloyd J. Austin III, September 21, 2021
Appendix B: Federal Register Notice--Notice of Request for
Public Comments on Section 232 National Security Investigation of
Imports of Neodymium-Iron-Boron (NdFeB) Permanent Magnets, September
27, 2021
Appendix C: Public Comment Summaries
Appendix D: U.S. NdFeB Permanent Magnet Industry Survey
Appendix E: Global NdFeB Magnet Production: A Firm-Level
Perspective
Appendix F: U.S. NdFeB Magnet Industry: Company Profiles
Appendix G: NdFeB Magnet Substitutes: Niron Magnetics
1. Executive Summary
This report summarizes the findings of an investigation conducted
by the U.S. Department of Commerce (the ``Department'') pursuant to
section 232 of the Trade Expansion Act of 1962, as amended, into the
effect of imports of neodymium-iron-boron (NdFeB) permanent magnets on
the national security of the United States.\1\ Secretary of Commerce
Gina Raimondo initiated the investigation on September 21, 2021, in
response to a recommendation in the June 2021 White House Report
``Building Resilient Supply Chains, Revitalizing American
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews under
Executive Order 14017.'' <SUP>2 3</SUP>
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\1\ NdFeB magnets are also called NdFeB permanent magnets,
neodymium-iron-boron (permanent) magnets, or neodymium (permanent)
magnets. This report uses the term NdFeB magnets.
\2\ Section 4 of this Report, ``Product Scope of the
Investigation,'' discusses the products under investigation. Section
4 also details ancillary products the Department examined to provide
traction on the investigation.
\3\ See ``Building Resilient Supply Chains, Revitalizing
American Manufacturing, and Fostering Broad-Based Growth: 100 Day
Reviews Under Executive Order 14017,'' The White House, June 2021,
<a href="https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf</a>.
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As required by the statute, the Secretary considered all factors
set forth in section 232(d). In particular, the Secretary examined the
effect of imports on national security requirements, specifically:
[[Page 9431]]
i. domestic production needed for projected national defense
requirements;
ii. the capacity of domestic industries to meet such requirements,
including the commercial demand needed for economic viability;
iii. existing and anticipated availabilities of the human
resources, products, raw materials, and other supplies and services
essential to the national defense;
iv. the requirements of growth of such industries and such supplies
and services including the investment, exploration, and development
necessary to assure such growth; and
v. the importation of goods in terms of their quantities,
availabilities, character, and use as those affect such industries; and
the capacity of the United States to meet national security
requirements.
In preparing this report, the Secretary also recognized the close
relationship between the economic welfare of the United States and its
national security. Factors that can compromise the nation's economic
welfare include, but are not limited to, the impact of ``foreign
competition on the economic welfare of individual domestic industries;
and any substantial unemployment, decrease in revenues of government,
loss of skills, or any other serious effects resulting from the
displacement of any domestic products by excessive imports.'' See 19
U.S.C. 1862(d). In particular, this report assesses whether NdFeB
magnets are being imported ``in such quantities'' and ``under such
circumstances'' as to ``threaten to impair the national security.'' \4\
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\4\ 19 U.S.C. 1862(b)(3)(A).
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The investigation was initiated to evaluate the effects of imports
of NdFeB magnets on the national security. There are two types of NdFeB
magnets--sintered and bonded. However, the investigation and this
report largely focus on sintered NdFeB magnets because: (1) Sintered
NdFeB magnets comprise over 93 percent of the global NdFeB magnet
market and are forecast to grow to over 97 percent of the global market
by 2030; (2) Sintered NdFeB magnets have a greater maximum energy
product than bonded NdFeB magnets, making them essential in high-
temperature applications required by the defense and critical
infrastructure sectors; and (3) Sintered NdFeB magnets are less easily
substituted for than their bonded counterparts.<SUP>5 6</SUP>
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\5\ Energy product refers to the magnetic energy stored in
material, dependent on coercivity and magnetization. ``Rare Earth
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of
Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\6\ References to NdFeB magnets indicate sintered NdFeB magnets,
except where otherwise specified.
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NdFeB magnets are the strongest permanent magnets commercially
available and improve the efficiency of electrical machines. NdFeB
magnets are used in hundreds of products ranging from the ubiquitous,
such as headphones and air conditioners, to the highly specialized,
like industrial robots. Of particular importance for evaluating the
effects of imports of NdFeB magnets on the national security are NdFeB
magnets' use in defense systems, including ship propulsion systems and
guided missile actuators, as well as numerous critical infrastructure
applications such as electric vehicle motors and offshore wind turbine
generators.\7\ Although NdFeB magnets' value tends to be small relative
to the cost of the end-product, they are nonetheless key to product
performance.
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\7\ The Presidential Policy Directive on Critical Infrastructure
Security and Resilience (PPD-21) advances a national policy to
strengthen and maintain secure, functioning, and resilient critical
infrastructure. The Cybersecurity and Infrastructure Security Agency
maintains a list of 16 critical infrastructure sectors ``whose
assets, systems, and networks, whether physical or virtual, are
considered so vital to the United States that their incapacitation
or destruction would have a debilitating effect on security,
national economic security, national public health or safety, or any
combination thereof.'' Most relevant to NdFeB magnet applications
are the Critical Manufacturing, Defense Industrial Base, and Energy
sectors, although NdFeB magnets are used widely in other critical
infrastructure sectors, including the Healthcare and Public Health
and the Information Technology sectors. See ``Critical
Infrastructure Sectors,'' Cybersecurity and Infrastructure Security
Agency, October 21, 2020, <a href="https://www.cisa.gov/critical-infrastructure-sectors">https://www.cisa.gov/critical-infrastructure-sectors</a>.
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NdFeB magnets are composed of about 69 percent iron, 30 percent
rare earths, and one percent boron by weight.\8\ NdFeB magnets contain
a mix of rare earth elements, primarily neodymium, praseodymium,
dysprosium, and terbium, depending on the end use.\9\ NdFeB magnets'
iron-boron component is made up of American Iron and Steel Institute
1001 steel and ferroboron.<SUP>10 11</SUP> Small amounts of material,
such as nickel and copper, dry-sprayed epoxy, or e-coat (epoxy), are
also used to coat NdFeB magnets to prevent corrosion.\12\ The rare
earth element component constitutes the largest portion of NdFeB magnet
cost.
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\8\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf">https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf</a>.
\9\ Toyota announced in 2018 that it had developed a NdFeB
magnet that substituted cerium and lanthanum for neodymium, lowering
total neodymium use by 50 percent. Although cerium substitution
typically leads to reduced performance in the form of lower heat
resistance and coercivity, Toyota claimed to have discovered a ratio
at which deterioration is suppressed. At the time of the
announcement, Toyota expected the magnets would be used in the first
half of the 2020s, but more recent updates are not available. See
``Toyota Develops New Magnet for Electric Motors Aiming to Reduce
Use of Critical Rare-Earth Element by up to 50%,'' Toyota, February
20, 2018, <a href="https://global.toyota/en/newsroom/corporate/21139684.html">https://global.toyota/en/newsroom/corporate/21139684.html</a>.
\10\ The American Iron and Steel Institute and the Society of
Automotive Engineers assign designations to types of steel. 1001
steel refers to a type of carbon steel. See ``Introduction to the
SAE/AISI Steel Numbering System,'' The Process Piping, n.d., <a href="https://www.theprocesspiping.com/introduction-sae-aisi-steel-numbering-system/">https://www.theprocesspiping.com/introduction-sae-aisi-steel-numbering-system/</a>.
\11\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf">https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf</a>.
\12\ Ibid.
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There are five main value chain steps prior to the production of
NdFeB magnets: mixed rare earth element mining, processing of rare
earth elements into rare earth carbonates, separation of rare earth
carbonates into individual rare earth oxides, reduction of rare earth
oxides into metals, and alloying of rare earth metals.<SUP>13 14</SUP>
Magnet manufacturers then process rare earth alloys into either
sintered or bonded NdFeB magnets. Sintered magnets are produced by
compacting powdered alloy into a solid mass by vacuum pressure without
melting it to the point of liquefaction. Bonded magnets are made of
rapidly quenched NdFeB magnetic powder mixed into binder and shaped
through compression, injection molding, or calendaring.
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\13\ Rare earth carbonates are also referred to as mixed
intermediates, although the term mixed intermediates can cover rare
earth chlorides.
\14\ Some publications condense processing and separation or
metallization and alloying into single value chain steps, for a
total of three or four value chain steps prior to magnet production.
The Department elected to divide the value chain into five steps
prior to magnet production based on industry consultation.
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Except for rare earths mining, the United States is not presently a
major participant in the NdFeB magnet value chain. The United States
has extremely limited capacity to manufacture NdFeB magnets and is
nearly one hundred percent dependent on imports to meet commercial and
defense requirements. In 2021, the United States imported 75 percent of
its sintered NdFeB magnet supply from China, with nine percent, five
percent, and four percent coming from Japan, the Philippines, and
Germany, respectively.<SUP>15 16 17</SUP> There is
[[Page 9432]]
currently only one firm in the United States, Noveon (formerly Urban
Mining Company), that produces sintered NdFeB magnets, albeit in small
quantities.<SUP>18 19 20</SUP> The United States has no domestic
production of rare earth oxides or metal. The United States is
dependent on foreign sources, especially China, for NdFeB magnets.
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\15\ The import figures cited here corresponds to the value of
magnet imports. Using data on unit imports of magnets increases
China's import share to almost 85 percent.
\16\ The Department's calculations using USITC data. ``USITC
Dataweb,'' U.S. International Trade Commission, last modified
October 25, 2021, <a href="https://dataweb.usitc.gov/trade/search/Import/HTS">https://dataweb.usitc.gov/trade/search/Import/HTS</a>.
\17\ Imports from the Philippines reflect activity by Japanese
firms. See Appendix E, ``Global NdFeB Magnet Production: A Firm-
Level Perspective,'' for more information.
\18\ Noveon indicated it can produce NdFeB magnets from recycled
or new or ``virgin'' material. Meeting between Noveon and the
Department of Commerce, (Virtual Meeting, November 12, 2021).
\19\ There are three firms, Bunting Magnetics, the Electrodyne
Company, and Tengam Engineering, that produce bonded NdFeB magnets
in the United States. Meeting between the Defense Logistics Agency
and the Department of Commerce, (Virtual Meeting, November 23,
2021).
\20\ Noveon was called Urban Mining Company until May 2022. See
``Urban Mining Company is now Noveon Magnetics: The Nation's Only
Manufacturer of Sustainable Rare Earth Magnets Powering our
Electrified Future,'' NewsDirect, May 16, 2022, <a href="https://newsdirect.com/news/urban-mining-company-is-now-noveon-magnetics-the-nations-only-manufacturer-of-sustainable-rare-earth-magnets-powering-our-electrified-future-214013391">https://newsdirect.com/news/urban-mining-company-is-now-noveon-magnetics-the-nations-only-manufacturer-of-sustainable-rare-earth-magnets-powering-our-electrified-future-214013391</a>.
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China dominates all steps of the global NdFeB magnet value
chain.\21\ In 2020, China controlled about 92 percent of the global
NdFeB magnet and magnet alloy market.\22\ China also dominated the 2020
upstream value chain steps, controlling about 58 percent of the rare
earth mining market, 89 percent of the oxide separation market, and 90
percent of the metallization market.<SUP>23 24 25</SUP> China controls
an even higher percentage of the heavy rare earth mining market,
including dysprosium and terbium, which are critical for high
performance NdFeB magnets.<SUP>26 27</SUP> China's dominant position in
the global NdFeB magnet value chain enables it to set prices at levels
that can make production unsustainable for firms operating in market
economies.\28\
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\21\ See Section 7, ``Global NdFeB Magnet Industry,'' and
especially Appendix E, ``Global NdFeB Magnet Production: A Firm-
level Perspective,'' for more information on global NdFeB magnet
value chains.
\22\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf">https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf</a>.
\23\ China produced about 60 percent of global rare earths in
2021. Daniel Cordier, ``Mineral Commodity Summaries 2022: Rare
Earths,'' U.S. Geological Survey, January 31, 2022, <a href="https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf">https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf</a>.
\24\ China's share of global rare earths mining increased from
58 percent in 2020 to 60 percent in 2021. See Section 7.1, ``Global
Demand.''
\25\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf">https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf</a>.
\26\ ``Hyperion Testwork Confirms High Value Heavy Rare
Earths,'' Mining Stock Education, August 9, 2021, <a href="https://www.miningstockeducation.com/2021/08/hyperion-testwork-confirms-high-value-heavy-rare-earths/">https://www.miningstockeducation.com/2021/08/hyperion-testwork-confirms-high-value-heavy-rare-earths/</a>.
\27\ USA Rare Earth indicated that China produces one hundred
percent of the global supply of dysprosium. Meeting between USA Rare
Earth and the Department of Commerce, (Virtual Meeting, December 10,
2021).
\28\ For example, Molycorp, a U.S. mining firm that operated the
Mountain Pass Mine in California, declared bankruptcy after China
increased its export quotas and rare earth prices fell. Tom Hals,
``Creditors of bankrupt rare earths miner Molycorp reach deal,''
Reuters, February 23, 2016, <a href="https://www.reuters.com/article/molycorp-bankruptcy-idUSL2N1621G0">https://www.reuters.com/article/molycorp-bankruptcy-idUSL2N1621G0</a>.
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China is the only country with operations in all steps of the NdFeB
magnet value chain, including upstream (mining, carbonates production,
and separation to oxides) and downstream (metal refining, alloy
production, and final magnet production) markets. All other countries
maintain operations in only some steps of the upstream or downstream
magnet value chain. Firms in the European Union, and especially Japan,
specialize in the production of NdFeB magnets and alloys, but have no
mining capacity. Japan is the second largest producer of NdFeB magnets
after China, comprising about seven percent of the global market.
Japanese firms also maintain magnet, alloy, and metal capacity in other
countries. Firms in Germany, Finland, the Netherlands, and Slovenia
produce minimal amounts of NdFeB magnets (less than one percent of
global production).<SUP>29 30</SUP> Japanese and European firms are
almost completely reliant on imported feedstocks to produce metals,
alloys, and ultimately NdFeB magnets.\31\
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\29\ ``About Magnet e Motion,'' Magnet e Motion, n.d., <a href="https://magnetemotion.com/about-magnet-e-motion.html">https://magnetemotion.com/about-magnet-e-motion.html</a>.
\30\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\31\ Neo Performance Materials produces rare earth oxides in
Estonia from non-European Union feedstock. Meeting between Neo
Performance Materials and the Department of Commerce, the Department
of Defense, and the U.S. Geological Survey, (Virtual Meeting,
November 30, 2021).
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The top upstream producers of rare earth minerals in 2021 were
China (60 percent), the United States (15 percent), Burma, (nine
percent), and Australia (eight percent).\32\ Malaysia comprises seven
percent of the 2020 market for rare earth oxide separation, due
entirely to the Australian firm Lynas Rare Earths.\33\ Outside of
China, production of metals is fragmented between Estonia, Laos,
Thailand, the United Kingdom, Vietnam, and other countries, with no
country having more than three percent of the market.\34\
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\32\ Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries
2022,'' U.S. Geological Survey, 2022, <a href="https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf">https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf</a>.
\33\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\34\ Ibid.
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The NdFeB magnet value chain's fragmentation means that even
countries which produce NdFeB magnets remain dependent in part on
Chinese inputs. Japan began diversifying its sources of rare earth
elements, carbonates, and oxides away from China in the early 2010s,
and the European Union has ongoing initiatives to develop a resilient
non-Chinese NdFeB magnet supply chain. Despite these efforts, both
economies and the United States remain reliant, to differing degrees,
on Chinese inputs. China has previously appeared to leverage its market
dominance to achieve foreign policy outcomes. For example, in 2010
China restricted exports of rare earth elements to Japan for two months
after a collision between a Chinese fishing boat and the Japanese coast
guard in disputed waters.<SUP>35 36</SUP> Dependence on China leaves
U.S. firms and U.S. allies vulnerable to similar Chinese coercion that
could have a negative impact on national defense and the preservation
of domestic critical infrastructure, such as transportation and energy.
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\35\ ``China resumes rare earth exports to Japan,'' BBC,
November 24, 2010, <a href="https://www.bbc.com/news/business-11826870">https://www.bbc.com/news/business-11826870</a>.
\36\ More broadly, China has encouraged localized production and
technology transfer in return for a steady supply of rare earths.
See Wayne M. Morrison and Rachel Tang, ``China's Rare Earth Industry
and Export Regime: Economic and Trade Implications for the United
States,'' Congressional Research Service, April 30, 2012, <a href="https://sgp.fas.org/crs/row/R42510.pdf">https://sgp.fas.org/crs/row/R42510.pdf</a>.
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Ongoing efforts by the U.S. Government and the private sector are
intended to mitigate this reliance on Chinese inputs and to establish
U.S. production capacity at all steps of the NdFeB magnet value chain.
The Department of Defense and the Department of Energy have made
limited investments in organizations with the goal of reestablishing
domestic production capacity throughout the supply chain. Noveon plans
to expand production over the next four years. In addition, three U.S.-
headquartered firms--MP Materials, Quadrant Magnetics, and USA Rare
Earth--and the German company Vacuumschmelze
[[Page 9433]]
plan to establish U.S. NdFeB magnet manufacturing facilities by
2026.\37\ Noveon and MP Materials have received Department of Defense
funding. MP Materials and USA Rare Earth are also looking to develop
U.S. capacity in pre-magnet value chain steps, including rare earths
mining, rare earth carbonates processing, rare earth oxides separation,
metallization, and alloying. Other non-magnet makers are considering
building U.S. facilities to produce rare earth oxides and metals. These
efforts, if successful, have the potential to create a complete supply
chain to produce NdFeB magnets in the United States. Based on
forecasted NdFeB magnet production, domestic sources could potentially
satisfy up to 51 percent of total U.S. demand by 2026.\38\
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\37\ On MP Materials, see ``MP Materials to Build U.S. Magnet
Factory, Enters Long-Term Supply Agreemenwt with General Motors,''
MP Materials, December 9, 2021, <a href="https://mpmaterials.com/articles/mp-materials-to-build-us-magnet-factory-enters-long-term-supply-agreement-with-general-motors/">https://mpmaterials.com/articles/mp-materials-to-build-us-magnet-factory-enters-long-term-supply-agreement-with-general-motors/</a>; On Quadrant Magnetics, see
``Quadrant's NeoGrass to Become New Magnet Plant in US,'' Magnetics
Business and Technology, April 5, 2022, <a href="https://magneticsmag.com/quadrants-neograss-to-become-new-magnet-plant-in-us/">https://magneticsmag.com/quadrants-neograss-to-become-new-magnet-plant-in-us/</a>; On USA Rare
Earth, see Trish Saywell, ``USA Rare Earth outlines mine-to-magnet
strategy,'' <a href="http://Mining.com">Mining.com</a>, January 8, 2021, <a href="https://www.mining.com/usa-rare-earth-outlines-mine-to-magnet-strategy/">https://www.mining.com/usa-rare-earth-outlines-mine-to-magnet-strategy/</a>; On Vacuumschmelze, see
``General Motors and Vacuumschmelze (VAC) Announce Plans to Build a
New Magnet Factory in the U.S. to Support EV Growth,'' General
Motors, December 9, 2021, <a href="https://investor.gm.com/news-releases/news-release-details/general-motors-and-vacuumschmelze-vac-announce-plans-build-new">https://investor.gm.com/news-releases/news-release-details/general-motors-and-vacuumschmelze-vac-announce-plans-build-new</a>.
\38\ This is a very optimistic figure with several strong
assumptions and should be taken as the maximum potential
contribution of the U.S. NdFeB magnet industry. The Department used
data from its survey of the U.S. NdFeB magnet industry to forecast
U.S. NdFeB magnet production through 2026. This does not consider
domestic production of NdFeB magnet inputs such as alloy or metal,
which may constrain the ability of U.S.-based firms to use domestic
feedstock to produce NdFeB magnets. [TEXT REDACTED], the demand
estimate includes NdFeB magnets that are and may continue to be
incorporated into intermediate and final products overseas. The 2030
total demand estimate is a high-growth scenario. See Section 8.1.4,
``Estimated NdFeB Magnet Import Penetration, 2017 to 2026,'' for
more details.
---------------------------------------------------------------------------
If successful, these efforts to produce NdFeB magnets in the United
States will be more than sufficient to satisfy U.S. defense-related
demand. However, given the fact that defense demand accounts for only a
small percentage of total demand, domestic firms in the NdFeB magnet
value chain cannot rely solely on defense-related contracts to be
viable. The nascent U.S. NdFeB magnet value chain will require
substantial and consistent commercial demand and need a broad customer
base to be economically sustainable. While domestic production is
expected to be substantially less than total U.S. demand, direct U.S.
demand for NdFeB magnets will be less than total demand because many
NdFeB magnets are integrated into intermediate and final products
overseas. These products--and the embedded magnets--are then imported
into the United States. In addition, firms that integrate NdFeB magnets
in the U.S. may be unwilling to pay a premium for domestic magnets,
which are expected to cost more than their Chinese counterparts.
On a potentially positive note, global and domestic demand for
NdFeB magnets is forecast to increase dramatically by 2030 and even
more so by 2050. The increase in demand is largely driven by global
efforts to reduce greenhouse gas emissions which boost the electric
vehicle and wind turbine industries. Substantial demand growth may
result in a supply crunch for NdFeB magnets but also represents a
critical opportunity to establish and maintain a resilient and
economically viable domestic NdFeB magnet supply chain.
1.1 Findings
In conducting the investigation, the Secretary came to the
following key findings:
1. NdFeB magnets are essential to U.S. national security:
a. NdFeB magnets are required for national defense systems. NdFeB
magnets are currently irreplaceable in key defense applications such as
fighter aircraft and missile guidance systems.
b. NdFeB magnets are required for critical infrastructure. NdFeB
magnets are used in critical infrastructure sectors including but not
limited to the energy sector (e.g., offshore wind turbines), the
healthcare and public health sector (e.g., some open MRI machines and
other medical equipment), and the critical manufacturing sector (e.g.,
electric vehicle motors).
c. NdFeB magnets are required for infrastructure that is critical
for climate change mitigation, identified by the President as an
essential element of U.S. national security, and the transition to a
green economy.\39\ In particular, NdFeB magnets are the technology of
choice for electric vehicles and offshore wind turbines.
---------------------------------------------------------------------------
\39\ See ``Executive Order on Tackling the Climate Crisis at
Home and Abroad,'' The White House, January 27, 2021, <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/">https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/</a>.
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2. Total domestic demand for NdFeB magnets is expected to grow:
a. Total U.S. consumption of NdFeB magnets is forecast to more than
double from 2020 to 2030, driven by increased demand from the electric
vehicle and wind energy industries.
b. Total domestic demand growth provides an opportunity to develop
the U.S. NdFeB magnet industry if enough end-user applications are
manufactured in the United States and the price differential between
U.S. and Chinese magnets is narrowed.
3. The United States and its allies are dependent on imports from
China:
a. The United States is essentially one hundred percent dependent
on imports of sintered NdFeB magnets and is highly dependent on imports
of bonded NdFeB magnets, primarily from China. The United States also
lacks domestic capacity at various earlier steps in the NdFeB magnet
value chain.
b. U.S. allies are also dependent on Chinese production, which
provides China political leverage.
4. The United States will continue to depend on imports:
a. There are multiple firms that intend to establish domestic
capacity at different steps of the NdFeB magnet value chain. Although
these plans have the potential to create a U.S. NdFeB magnet value
chain from mine to magnet, they will not produce enough magnets to
eliminate U.S. dependence on Chinese imports.
b. Domestic NdFeB magnet manufacturing will be constrained by
capacity limitations at earlier steps in the value chain, in particular
rare earth metal refining and NdFeB alloy production. Some U.S. NdFeB
magnet manufacturers will have to rely on imported metal and alloy
feedstocks to produce NdFeB magnets.
c. The U.S. NdFeB magnet industry will struggle to fulfill total
critical infrastructure demand.
5. The U.S. NdFeB magnet industry faces significant challenges:
a. The nascent U.S. NdFeB magnet industry faces significant
barriers to reaching its production targets. These include but are not
limited to Chinese competition, financial and human capital
constraints, and consistent demand for more expensive domestic magnets.
1.2 Determination
Based on the findings in this report, the Secretary concludes that
the present quantities and circumstances of NdFeB magnet imports
threaten to impair the national security as defined in section 232 of
Trade Expansion Act of 1962, as amended.
1.3 Recommendations
The Department has identified several non-exhaustive actions that
would facilitate the development of a domestic
[[Page 9434]]
NdFeB magnet industry, support a reliable supply of NdFeB magnets, and
lessen the risk that NdFeB magnet imports threaten the national
security. The Secretary recommends pursuing all proposed actions.
1. The U.S. Government should engage with allies through existing
fora to efficiently develop production from diverse sources, promote
research on NdFeB magnet-related technologies, encourage intellectual
property licensing, and cooperate on foreign investment review
mechanisms.
2. To bolster the U.S. NdFeB magnet industry by targeting domestic
supply the U.S. Government should:
a. Establish a tax credit for domestic manufacturing of rare earth
elements, NdFeB magnets, and NdFeB magnet substitutes.
b. Continue to direct Defense Production Act (DPA) Title III
funding to firms in the U.S. NdFeB magnet industry, in particular to
establish metal refining and alloy production facilities.
c. Encourage eligible NdFeB magnet industry participants to use
Export-Import Bank financing through the Make More in America
Initiative and the China and Transformational Exports Program.
d. Allocate additional funding to NdFeB magnet industry
participants through other applicable instruments, such as the
Bipartisan Infrastructure Law.
e. Use the Defense Priorities and Allocations System to facilitate
NdFeB magnet industry participants' acquisition of critical equipment
and feedstock.
f. Evaluate the use of export controls for domestic producers who
face difficulties acquiring feedstocks from domestic sources due to
competition with foreign consumers.
g. Increase the National Defense Stockpile inventories of rare
earth elements and other strategic and critical materials related to
NdFeB magnets.
3. To promote the development of a domestic industry by enhancing
domestic demand the U.S. Government should:
a. Establish a forum under a lead U.S. Government agency to
facilitate cooperation and share information about industry-wide issues
between producers and consumers of NdFeB magnets, alloys, rare earth
metals, and rare earth oxides. In particular, the U.S. Government
should use DPA Title VII to promote offtake agreements using voluntary
agreements.
b. Promote the recycling and reprocessing of NdFeB magnets by
developing labeling requirements for end-of-life products using NdFeB
magnets, leveraging the Defense Logistics Agency's Strategic Material
Recovery and Reuse Program, U.S. Government-owned data centers, and
other U.S. Government-owned products like electric vehicles to
establish a source of recyclable feedstock, and exploring reuse of
other potential feedstocks such as heavy mineral sands and coal
tailings.
c. Mandate minimum domestic and ally content requirements for NdFeB
magnets used in U.S. Government-owned electric vehicles and offshore
wind turbines that power U.S. Government-owned buildings. NdFeB magnets
used in these products should be produced domestically or by allies and
contain feedstock sourced domestically or from allies. To minimize
disruption, content requirements can be phased-in and waived if there
are insufficient eligible sources.
d. Establish a consumer rebate for products, such as electric
vehicles, that use U.S. or ally produced NdFeB magnets.
4. To support the medium- to long-term development of the U.S.
NdFeB magnet industry and enhance the resiliency of the U.S. NdFeB
magnet supply chain, the U.S. Government should:
a. Continue to fund research to reduce the use of rare earth
elements in NdFeB magnets, develop magnets that can substitute for
NdFeB magnets, and develop technologies that avoid the use of magnets--
including NdFeB magnets--in electric vehicle motors and wind turbine
generators.
b. Support the development of the human capital required by the
nascent NdFeB magnet industry, including materials scientists and
production line workers, through applicable funding sources.
5. The U.S. Government should continue to monitor the NdFeB magnet
value chain to ensure that U.S. and ally firms are not adversely
impacted by non-market factors or unfair trade actions, such as
intellectual property violations or dumping.
2. Legal Framework
2.1 Section 232 Requirements
Section 232 of the Trade Expansion Act of 1962, as amended,
provides the Secretary with the authority to conduct investigations to
determine the effect on the national security of the United States of
imports of any article. It authorizes the Secretary to conduct an
investigation if requested by the head of any department or agency,
upon application of an interested party, or upon their own motion. See
19 U.S.C. 1862(b)(1)(A).
Section 232 directs the Secretary to submit to the President a
report with recommendations for ``action or inaction under this
section'' and requires the Secretary to advise the President if any
article ``is being imported into the United States in such quantities
or under such circumstances as to threaten to impair the national
security.'' See 19 U.S.C. 1862(b)(3)(A).
Section 232(d) directs the Secretary and the President to, in light
of the requirements of national security and without excluding other
relevant factors, give consideration to the domestic production needed
for projected national defense requirements and the capacity of the
United States to meet national security requirements. See 19 U.S.C.
1862(d).
Section 232(d) also directs the Secretary and the President to
``recognize the close relation of the economic welfare of the Nation to
our national security, and . . . take into consideration the impact of
foreign competition on the economic welfare of individual domestic
industries'' by examining whether any substantial unemployment,
decrease in revenues of government, loss of skills or investment, or
other serious effects resulting from the displacement of any domestic
products by excessive imports, or other factors, results in a
``weakening of our internal economy'' that may impair the national
security.\40\ See 19 U.S.C. 1862(d).
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\40\ An investigation under Section 232 looks at excessive
imports for their threat to the national security, rather than
looking at unfair trade practices as in an antidumping
investigation.
---------------------------------------------------------------------------
Once an investigation has been initiated, section 232 mandates that
the Secretary provide notice to the Secretary of Defense that such an
investigation has been initiated. section 232 also requires the
Secretary to do the following:
1. ``Consult with the Secretary of Defense regarding the
methodological and policy questions raised in [the] investigation;''
2. ``Seek information and advice from, and consult with,
appropriate officers of the United States;'' and
3. ``If it is appropriate and after reasonable notice, hold public
hearings or otherwise afford interested parties an opportunity to
present information and advice relevant to such investigation.'' \41\
See 19 U.S.C. 1862(b)(2)(A)(i)-(iii).
---------------------------------------------------------------------------
\41\ Department regulations (i) set forth additional authority
and specific procedures for such input from interested parties, see
15 CFR 705.7 and 705.8, and (ii) provide that the Secretary may vary
or dispense with those procedures ``in emergency situations, or when
in the judgment of the Department, national security interests
require it.'' Id., Sec. 705.9.
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[[Page 9435]]
As detailed in the report, all of the requirements set forth above
have been satisfied.
In conducting the investigation, section 232 permits the Secretary
to request that the Secretary of Defense provide an assessment of the
defense requirements of the article that is the subject of the
investigation. See 19 U.S.C. 1862(b)(2)(B).
Upon completion of a section 232 investigation, the Secretary is
required to submit a report to the President no later than 270 days
after the date on which the investigation was initiated. See 19 U.S.C.
1862(b)(3)(A). The report must:
1. Set forth ``the findings of such investigation with respect to
the effect of the importation of such article in such quantities or
under such circumstances upon the national security;''
2. Set forth, ``based on such findings, the recommendations of the
Secretary for action or inaction under this section;'' and
3. ``If the Secretary finds that such article is being imported
into the United States in such quantities or under such circumstances
as to threaten to impair the national security . . . so advise the
President.'' See 19 U.S.C. 1862(b)(3)(A).
All unclassified and non-proprietary portions of the report
submitted by the Secretary to the President must be published.
Within 90 days after receiving a report in which the Secretary
finds that an article is being imported into the United States in such
quantities or under such circumstances as to threaten to impair the
national security, the President shall:
1. ``Determine whether the President concurs with the finding of
the Secretary'' and
2. ``If the President concurs, determine the nature and duration of
the action that, in the judgment of the President, must be taken to
adjust the imports of the article and its derivatives so that such
imports will not threaten to impair the national security.'' See 19
U.S.C. 1862(c)(1)(A).
2.2 Discussion
Although section 232 does not specifically define ``national
security,'' both section 232, and the implementing regulations at 15
CFR part 705, contain non-exclusive lists of factors that the Secretary
must consider in evaluating the effect of imports on the national
security. Congress in section 232 explicitly determined that ``national
security'' includes, but is not limited to, ``national defense''
requirements. See 19 U.S.C. 1862(d).
In a 2001 report, the Department determined that ``national
defense'' includes both the defense of the United States directly, and
the ``ability to project military capabilities globally.'' \42\ The
Department also concluded in 2001 that, ``in addition to the
satisfaction of national defense requirements, the term ``national
security'' can be interpreted more broadly to include the general
security and welfare of certain industries, beyond those necessary to
satisfy national defense requirements, which are critical to the
minimum operations of the economy and government.'' The Department
called these ``critical industries.'' \43\ Although this report applies
these reasonable interpretations of ``national defense'' and ``national
security,'' it relies on the more recent 16 critical infrastructure
sectors identified in Presidential Policy Directive 21 instead of the
28 industry sectors identified in the 2001 Report.<SUP>44 45</SUP>
---------------------------------------------------------------------------
\42\ ``The Effects of Imports of Iron Ore and Semi-Finished
Steel on the National Security,'' Department of Commerce, Bureau of
Export Administration, October 2001 (``2001 Iron and Steel
Report''), at 5, <a href="https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file">https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file</a>.
\43\ Ibid.
\44\ Presidential Policy Directive 21, ``Critical Infrastructure
Security and Resilience,'' February 12, 2013 (``PPD-21'').
\45\ ``The Effects of Imports of Iron Ore and Semi-Finished
Steel on the National Security,'' Department of Commerce, Bureau of
Export Administration, October 2001 (``2001 Iron and Steel
Report''), <a href="https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file">https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file</a>.
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Section 232 directs the Secretary to determine whether imports of
any article are being made ``in such quantities'' or ``under such
circumstances'' that those imports ``threaten to impair the national
security.'' See 19 U.S.C. 1862(b)(3)(A). The statutory construction
makes clear that either the quantities or the circumstances, standing
alone, may be sufficient to support an affirmative finding. The two may
also be considered together, particularly when the circumstances act to
prolong or magnify the impact of the quantities being imported.
The statute does not define a threshold for when ``such
quantities'' of imports are sufficient to threaten to impair the
national security, nor does it define the ``circumstances'' that might
qualify.
Similarly, the statute does not require a finding that the
quantities or circumstances are impairing the national security.
Instead, the threshold question under section 232 is whether the
quantities or circumstances ``threaten to impair the national
security.'' See 19 U.S.C. 1862(b)(3)(A). This makes evident that
Congress expects an affirmative finding under section 232 before an
actual impairment of the national security.\46\
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\46\ The 2001 Iron and Steel Report used the phrase
``fundamentally threaten to impair'' when discussing how imports may
threaten to impair national security. See 2001 Iron and Steel Report
at 7 and 37. Because the term ``fundamentally'' is not included in
the statutory text and could be perceived as establishing a higher
threshold, the Secretary expressly does not use the qualifier in
this report. The statutory threshold in Section 232(b)(3)(A) is
unambiguously ``threaten to impair'' and the Secretary adopts that
threshold without qualification. 19 U.S.C. 1862(b)(3)(A).
---------------------------------------------------------------------------
Section 232(d) contains a list of factors for the Secretary to
consider in determining if imports ``threaten to impair the national
security'' \47\ of the United States, and this list is mirrored in the
implementing regulations. See 19 U.S.C. 1862(d) and 15 CFR 705.4.
Congress was careful to note twice in section 232(d) that the list
provided, though mandatory, is not exclusive.\48\ Congress'
illustrative list is focused on the ability of the United States to
maintain the domestic capacity to provide the articles in question as
needed to maintain the national security of the United States.\49\
Congress broke
[[Page 9436]]
the list of factors into two equal parts using two separate sentences.
The first sentence focuses directly on ``national defense''
requirements, thus making clear that ``national defense'' is a subset
of the broader term ``national security.'' The second sentence focuses
on the broader economy and expressly directs that the Secretary and the
President ``shall recognize the close relation of the economic welfare
of the Nation to our national security.'' \50\ See 19 U.S.C. 1862(d).
---------------------------------------------------------------------------
\47\ 19 U.S.C. 1862(b)(3)(A).
\48\ See 19 U.S.C. 1862(d) (``the Secretary and the President
shall, in light of the requirements of national security and without
excluding other relevant factors . . . '' and ``serious effects
resulting from the displacement of any domestic products by
excessive imports shall be considered, without excluding other
factors . . . '').
\49\ This reading is supported by Congressional findings in
other statutes. See, e.g., 15 U.S.C. 271(a)(1) (``The future well-
being of the United States economy depends on a strong manufacturing
base . . .'') and 50 U.S.C. 4502(a) (``Congress finds that--(1) the
security of the United States is dependent on the ability of the
domestic industrial base to supply materials and services . . .
(2)(C) to provide for the protection and restoration of domestic
critical infrastructure operations under emergency conditions . . .
(3) . . . the national defense preparedness effort of the United
States government requires--(C) the development of domestic
productive capacity to meet--(ii) unique technological requirements
. . . (7) much of the industrial capacity that is relied upon by the
United States Government for military production and other national
defense purposes is deeply and directly influenced by--(A) the
overall competitiveness of the industrial economy of the United
States; and (B) the ability of industries in the United States, in
general, to produce internationally competitive products and operate
profitably while maintaining adequate research and development to
preserve competitiveness with respect to military and civilian
production; and (8) the inability of industries in the United
States, especially smaller subcontractors and suppliers, to provide
vital parts and components and other materials would impair the
ability to sustain the Armed Forces of the United States in combat
for longer than a short period.'').
\50\ Accord 50 U.S.C. 4502(a).
---------------------------------------------------------------------------
In addition to ``national defense'' requirements, two of the
factors listed in the second sentence of section 232(d) are
particularly relevant in this investigation. Both are directed at how
``such quantities'' of imports threaten to impair national security See
19 U.S.C. 1862(b)(3)(A). In administering section 232, the Secretary
and the President are required to ``take into consideration the impact
of foreign competition on the economic welfare of individual domestic
industries'' and any ``serious effects resulting from the displacement
of any domestic products by excessive imports'' in ``determining
whether such weakening of our internal economy may impair the national
security.'' See 19 U.S.C. 1862(d).
After careful examination of the facts in this investigation, the
Secretary has determined that the present quantities and circumstance
of NdFeB magnets imports threaten to impair the national security, as
defined in section 232.
3. Investigative Process
3.1 Initiation of Investigation
On September 21, 2021, Secretary of Commerce Gina Raimondo
initiated the investigation to determine the effects of imports of
NdFeB magnets on the national security based on a recommendation in the
June 2021 White House Report ``Building Resilient Supply Chains,
Revitalizing American Manufacturing, and Fostering Broad-Based Growth:
100 Day Reviews under Executive Order 14017'' (``White House
Report'').\51\ The White House Report noted that the United States is
heavily dependent on imports of NdFeB magnets, which are important
components of defense and civil industrial systems, and therefore
recommended that the Department evaluate whether to initiate an
investigation under section 232 of the Trade Expansion Act of 1962, as
amended. Pursuant to section 232(b)(1)(b), the Department notified the
U.S. Department of Defense of its intent to conduct an investigation in
a letter of September 21, 2021, from Secretary Raimondo to Secretary of
Defense, Lloyd Austin III (see Appendix A).
---------------------------------------------------------------------------
\51\ ``Building Resilient Supply Chains, Revitalizing American
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews
Under Executive Order 14017,'' The White House, June 2021, <a href="https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf</a>.
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3.2 Public Comments
On September 27, 2021, the Department published a Federal Register
Notice announcing the initiation of an investigation to determine the
effect of imports of NdFeB magnets on the national security (see
Appendix B).\52\ The notice also announced the opening of the public
comment period. In the notice, the Department invited interested
parties to submit written comments, opinions, data, information, or
advice relevant to the criteria listed in section 705.4 of the National
Security Industrial Base Regulations (15 CFR 705.4) as they affect the
requirements of national security, including the following:
---------------------------------------------------------------------------
\52\ See also ``Notice of Request for Public Comments on Section
232 National Security Investigation of Imports of Neodymium-Iron-
Boron (NdFeB) Permanent Magnets,'' Federal Register, September 27,
2021, <a href="https://www.federalregister.gov/documents/2021/09/27/2021-20903/notice-of-request-for-public-comments-on-section-232-national-security-investigation-of-imports-of">https://www.federalregister.gov/documents/2021/09/27/2021-20903/notice-of-request-for-public-comments-on-section-232-national-security-investigation-of-imports-of</a>.
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(a) Quantity of the articles subject to the investigation and other
circumstances related to the importation of such articles;
(b) Domestic production capacity needed for these articles to meet
projected national defense requirements;
(c) The capacity of domestic industries to meet projected national
defense requirements;
(d) Existing and anticipated availability of human resources,
products, raw materials, production equipment, facilities, and other
supplies and services essential to the national defense;
(e) Growth requirements of domestic industries needed to meet
national defense requirements and the supplies and services including
the investment, exploration and development necessary to assure such
growth;
(f) The impact of foreign competition on the economic welfare of
any domestic industry essential to our national security;
(g) The displacement of any domestic products causing substantial
unemployment, decrease in the revenues of government, loss of
investment or specialized skills and productive capacity, or other
serious effects;
(h) Relevant factors that are causing or will cause a weakening of
our national economy; and
(i) Any other relevant factors.
The public comment period closed on November 12, 2021. The
Department received 41 submissions. Parties who submitted comments
included representatives of the domestic NdFeB magnet industry,
including firms at different stages of the NdFeB magnet value chain,
representatives of the foreign NdFeB magnet industry, representatives
of consumers of NdFeB magnets such as the automobiles and electronics
industries, representatives of the governments of Australia, Canada,
the European Union, and Japan, and other concerned parties.
The Department carefully reviewed the public comments and factored
all arguments and data into the investigative process. Public comments
from representatives of consumers of NdFeB magnets tended to oppose the
implementation of tariffs, citing the negative impact of tariffs for
domestic industries that incorporate NdFeB magnets into end products.
Representatives of foreign governments echoed concern for the
imposition of tariffs and urged the investigation to recognize the
strong ties between the United States and its allies. Representatives
of the domestic NdFeB magnet industry discussed their future production
plans, enumerated the difficulties firms faced in establishing a
domestic value chain for the production of NdFeB magnets, and proposed
recommendations to alleviate challenges. Two of the most cited
challenges were Chinese competition, aided by favorable tax policies,
lower environmental and labor costs, and domestic subsidies, and the
difficulty of acquiring key intellectual property for sintered NdFeB
magnets owned by Hitachi. A number of NdFeB magnet industry
stakeholders indicated support for tax credit legislation for
domestically produced NdFeB magnets. The public comments of key
stakeholders are summarized in Appendix C, ``Public Comment
Summaries,'' which also includes a link to the docket number
[[Page 9437]]
(BIS-2021-0035) under which all public comments can be viewed in full
on <a href="http://Regulations.gov">Regulations.gov</a>.\53\
---------------------------------------------------------------------------
\53\ See also ``86 FR 53277 NdFeB Permanent Magnets 232
investigation_published 9-27-21_comments due 11-12-21,''
<a href="http://Regulations.gov">Regulations.gov</a>, September 27, 2021, <a href="https://www.regulations.gov/document/BIS-2021-0035-0001">https://www.regulations.gov/document/BIS-2021-0035-0001</a>.
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3.3 Information Gathering and Data Collection Activities
Due to the limited number of firms engaged in the U.S. NdFeB magnet
industry, it was determined that a public hearing was not necessary to
conduct a comprehensive investigation. In lieu of holding a public
hearing on this investigation, the Department fielded a mandatory U.S.
NdFeB Permanent Magnet Industry Survey (the ``survey'') (see Appendix
D, ``U.S. NdFeB Permanent Magnet Industry Survey'') to participants in
the U.S. NdFeB magnet industry using statutory authority pursuant to
section 705 of the Defense Production Act of 1950, as amended (50
U.S.C. 4555) (DPA). The Department deployed the survey on January 31,
2022, to 60 firms that it identified as current or prospective
manufacturers and/or distributors of NdFeB magnets, producers of
components used in the production of NdFeB magnets, and significant
consumers of NdFeB magnets in critical end-use sectors, with one or
more facilities in the United States. Although participants represented
all steps of the NdFeB value chain, the Department made a particular
effort to identify and deploy the survey to all current or near-
commercialization producers of NdFeB magnets and/or components used in
the production of NdFeB magnets, and only sampled a small number of
distributors and end-users. Seven NdFeB magnet value chain producers
headquartered outside of the United States were invited to submit
responses reflecting their foreign operations on a voluntary basis. The
Department received 51 complete responses.
The survey provided a mechanism for respondents to disclose
confidential and non-public information. The survey collected detailed
information concerning factors such as current and planned facilities,
production, capacity utilization, purchases/sales, employment, capital
expenditure, critical machinery, research and development, and
challenges and competition. The resulting data provided the Department
with detailed industry information that was otherwise not publicly
available and was needed to effectively conduct analysis for this
investigation.
The Department deems the information furnished in the survey
responses business confidential and will not publish or disclose it
except in accordance with section 705 of the DPA, which prohibits the
publication or disclosure of this information unless the President
determines that the withholding of such information is contrary to the
interest of the national defense. Therefore, the information submitted
to the Department in response to the survey will not be shared with any
non-government entity other than in aggregate form.
The Department also held 17 meetings with 19 unique U.S. NdFeB
magnet industry stakeholders to gather information on firms'
perspectives on the industry. Table 1 displays the firms the Department
held meetings with, along with their place in the value chain and the
domicile of their parent firm.
Table 1--Industry Stakeholder Meeting Participants
----------------------------------------------------------------------------------------------------------------
Description of current and
Firm name Parent location Current market segment planned market segment
participation participation
----------------------------------------------------------------------------------------------------------------
American Resources................. United States......... N/A................... Planned producer of rare
earth oxides from rare
earth element waste from a
variety of feedstocks,
including battery metals
and end of life products.
Arnold Magnetics................... United States......... N/A................... Current producer of
samarium-cobalt magnets
that indicates it could
produce NdFeB magnets if
it had access to relevant
intellectual property.
Energy Fuels....................... United States......... Rare Earth Carbonates Current producer of mixed
Processing. rare earth carbonates from
monazite. Prospective
producer of rare earth
oxides and rare earth
metals.
General Motors..................... United States......... NdFeB Magnet Consumer. Current consumer of NdFeB
magnets. Has a binding
agreement with MP
Materials and a non-
binding agreement with
Vacuumschmelze to purchase
NdFeB magnets.
IperionX........................... Australia............. N/A................... Planned domestic producer
of heavy mineral sands and
monazite, which can be
processed into rare earth
carbonates.
Lynas Rare Earths.................. Australia............. Rare Earth Element Current rare earth element
Mining; Rare Earth miner and producer of
Oxide Separation. mixed and separated rare
earth oxides. Current
production is outside of
the United States but
planned rare earth oxide
production in the United
States.
MP Materials....................... United States......... Rare Earth Element Current producer of rare
Mining. earth elements. Planned
producer of rare earth
oxides, rare earth metals,
rare earth alloys, and
NdFeB magnets.
National Electrical Manufacturers United States......... NdFeB Magnet Consumer. An industry association
Association. that includes current
consumers of NdFeB
magnets. Representatives
of Danfoss (products
include heat pumps and
motors), NIDEC (products
include motors), and ABB
(products include
robotics) participated.
Neo Performance Materials.......... Canada................ Rare Earth Oxide Current producer of rare
Separation; Metal earth oxides, rare earth
Refining; Rare Earth metals, rare earth alloys,
Alloy Production; and NdFeB magnets.
NdFeB Magnet Production is entirely
Production. outside of the United
States.
Niron Magnetics.................... United States......... N/A................... Planned producer of iron-
nitride magnets, a NdFeB
magnet substitute.
Quadrant Magnetics................. United States......... N/A................... Planned producer of NdFeB
magnets.
[[Page 9438]]
Shin-Etsu.......................... Japan................. Metal Refining; Rare Current producer of rare
Earth Alloy earth metals, rare earth
Production; NdFeB alloys, and NdFeB magnets.
Magnet Production. Production is entirely
outside of the United
States.
Turntide Technologies.............. United States......... NdFeB Magnet Current producer of a NdFeB
Substitute Production. magnet-free motor.
Noveon............................. United States......... NdFeB Magnet Current recycler and
Production; NdFeB remanufacturer of NdFeB
Magnet Recycling. magnets. [TEXT REDACTED].
USA Rare Earth..................... United States......... N/A................... Planned rare earth element
miner and planned producer
of rare earth carbonates,
rare earth oxides, and
NdFeB magnets.
Vacuumschmelze..................... Germany............... NdFeB Magnet Current producer of NdFeB
Production. magnets. Planned NdFeB
magnet production in the
United States.
----------------------------------------------------------------------------------------------------------------
3.4 Interagency Consultation
The Department consulted with the Department of Defense's Office of
Industrial Base Policy and the Defense Logistics Agency regarding
estimates of defense-related demand, as well as methodological and
policy questions that arose during the investigation. The Department
also consulted with other U.S. Government agencies with expertise and
information regarding the NdFeB magnet industry including the
Department of Energy, the Department of State, and the Environmental
Protection Agency.
4. Product Scope of the Investigation
The directive of the investigation is to assess the effects of
imports of NdFeB magnets on the national security of the United States.
NdFeB magnets can be produced through bonding or sintering processes.
Sintered magnets currently comprise approximately 93 percent of the
global NdFeB magnet market, can be used in more demanding applications,
and are not easily substitutable with alternative
materials.<SUP>54 55</SUP> Harmonized Tariff Schedule (HTS)
8505.11.0070 covers the imports of ``Permanent magnets and articles
intended to become magnets after magnetization: Of metal: Sintered
neodymium-iron-boron.'' Bonded NdFeB magnets do not have their own HTS
code but fall under HTS 8505.11.0090 (``Permanent magnets and articles
intended to become magnets after magnetization: Of metal: Other'').
---------------------------------------------------------------------------
\54\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\55\ Meeting between the Critical Materials Institute and the
Department of Commerce, (Virtual Meeting October 6, 2021).
---------------------------------------------------------------------------
In order to ensure that the full NdFeB magnet value chain was
covered, the Department also examined the supply chains of feedstocks
and primary and intermediate products essential to the production of
NdFeB magnets. These include rare earths, rare earth carbonates, rare
earth oxides, rare earth metals, and rare earth alloys. NdFeB magnets
generally use four rare earth elements with supply chain
vulnerabilities: neodymium, praseodymium, dysprosium, and terbium.\56\
Although iron in the form of 1001 steel, boron, and coating materials
such as copper are also components of NdFeB magnets, their supply
chains are not expected to pose major issues for magnet production and
were not a focus of this investigation.\57\
---------------------------------------------------------------------------
\56\ Cerium is sometimes used in NdFeB magnets but is an
overproduced rare earth element and as such does not pose a supply
chain vulnerability.
\57\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
---------------------------------------------------------------------------
As of 2020, consumer electronics constituted the largest source of
total U.S. demand for NdFeB magnets (45 percent), followed by
industrial motors (30 percent).\58\ However, this investigation and
report focuses on NdFeB magnets' use in electric vehicles and wind
turbines, in addition to defense systems, for several reasons. The U.S.
Government has recognized the electric vehicle and wind turbine
industries as critical infrastructure.\59\ These industries are
forecast to be the main drivers of total demand growth for NdFeB
magnets, reaching 55 percent of total U.S. demand by 2030 and 61
percent of total U.S. demand by 2050 (see section 6.2, ``U.S
Demand'').\60\ In addition, U.S. leadership in and adoption of these
technologies are key to the U.S. Government's efforts to address the
existential threat caused by climate change. The investigation
therefore also considered industries that depend on NdFeB magnets,
focusing on the electric vehicle and wind turbine industries.
Understanding and considering the effects of any determinations and
recommendations on these and other NdFeB magnet-consuming sectors is
necessary to ensure a complete analysis of the effect of NdFeB magnet
imports on the national security.
---------------------------------------------------------------------------
\58\ Ibid.
\59\ See ``Critical Infrastructure Sectors,'' Cybersecurity and
Infrastructure Security Agency, October 21, 2020, <a href="https://www.cisa.gov/critical-infrastructure-sectors">https://www.cisa.gov/critical-infrastructure-sectors</a>.
\60\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
---------------------------------------------------------------------------
5. NdFeB Magnet Production
5.1 Production Process and Value Chain Steps
NdFeB magnets are an intermediate product composed of rare earths
and other elements and are necessary for incorporation into a variety
of consumer, infrastructure, and defense end-uses.\61\ By weight, NdFeB
magnets are typically composed of about 30 percent rare earth elements,
69 percent
[[Page 9439]]
iron, and one percent boron. NdFeB magnets primarily use neodymium and
praseodymium, with various amounts of dysprosium or terbium added to
increase coercivity at elevated temperatures (i.e., heat resistance).
As mentioned earlier, this investigation focuses on the rare earths
value chain and current and prospective U.S. production and does not
consider iron and boron. There are six main steps in the NdFeB magnet
value chain inclusive of magnet production: mining, mixed rare earths
processing to carbonates, separation of carbonates into oxides,
refinement of oxides into metal, alloy production, and magnet
production.
---------------------------------------------------------------------------
\61\ Except where otherwise noted, this section summarizes
information on the NdFeB magnet value chain found in the DoE's
``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report.'' See
``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,''
Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
---------------------------------------------------------------------------
Rare earth elements can be extracted from mining, unconventional
sources, and recycled materials. There are two groups of rare earths--
light rare earths and heavy rare earths--defined by their atomic
weights. In the United States, rare earths are mined from bastnaesite,
a light rare earth-rich ore, or monazite, generally as a byproduct of
heavy mineral sands.\62\ Outside of the United States, ion adsorption
clays, sometimes called ionic clays, are also a source of rare earths,
especially heavy rare earths.<SUP>63 64</SUP> Mining projects are often
referred to by their grade, which indicates the percentage of rare
earths contained in the mined ore. For reference, the Mountain Pass
Mine in California, owned and operated by MP Materials, is considered
one of the world's highest-grade deposits of bastnaesite, containing on
average about seven percent rare earths content.\65\ Lynas Rare Earths'
Mt. Weld deposit in Western Australia, the other major non-Chinese
deposit currently in operation, has a designated grade of about eight
percent.\66\ Once mined, rare earths are beneficiated using one of
several techniques to increase the concentration of rare earths.
Research has also been done on extracting rare earths from
unconventional sources, such as coal ash and mine tailings, although
these techniques have not been commercialized.
---------------------------------------------------------------------------
\62\ Heavy mineral sands are mainly mined for titanium and
zircon. See ``Heavy Mineral Sand,'' Science Direct, n.d., <a href="https://www.sciencedirect.com/topics/engineering/heavy-mineral-sand">https://www.sciencedirect.com/topics/engineering/heavy-mineral-sand</a>.
\63\ Although there may be deposits of ionic clays in the United
States, they are not currently a source of rare earth elements. See
``Rare Earth Element Accumulation Processes Resulting in High-Value
Metal Enrichments in Regolith,'' U.S. Geological Survey, August 3,
2018, <a href="https://www.usgs.gov/centers/geology%2C-energy-%26amp%3Bamp%3B-minerals-science-center/science/rare-earth-element-accumulation#overview">https://www.usgs.gov/centers/geology%2C-energy-%26amp%3Bamp%3B-minerals-science-center/science/rare-earth-element-accumulation#overview</a>.
\64\ Ionic clays are an important source of heavy rare earths in
China. See Daniel J. Packey and Dudley Kingsnorth, ``The impact of
unregulated ionic clay rare earth mining in China,'' Resources
Policy 48: 112-116, <a href="https://doi.org/10.1016/j.resourpol.2016.03.003">https://doi.org/10.1016/j.resourpol.2016.03.003</a>.
\65\ Comments of MP Materials to Request for Public Comments,
``Section 232 National Security Investigation of Imports of
Neodymium-Iron-Boron (NdFeB) Permanent Magnets,'' 86 FR 53277,
November 12, 2021.
\66\ ``2021 Annual Report,'' Lynas Rare Earths, Ltd., 2021,
<a href="https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf">https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf</a>.
---------------------------------------------------------------------------
Once mined and concentrated, rare earths are separated into
individual rare earth oxides. The primary method used to separate rare
earth oxides is solvent extraction. The first step in the process is
usually to remove cerium, since it is a low-value rare earth element.
The cerium-free rare earth oxide mixture is then placed in mixer
settlers composed of acidic reagents to separate rare earth elements
based on their atomic weight. As a result, solvent extraction consumes
significant quantities of acid and water and generates environmentally
unfriendly waste. Solvent extraction processes are also tailored to
feedstocks. Although facilities can be reorganized to accommodate new
sources of rare earth concentrate, it takes time and resources to do
so.\67\ [TEXT REDACTED].\68\ Rare earths can also be extracted from
end-of-life products.
---------------------------------------------------------------------------
\67\ Meeting between Lynas Rare Earths and the Department of
Commerce, (Virtual Meeting, March 30, 2022); Meeting between USA
Rare Earth and the Department of Commerce, (Virtual Meeting,
December 10, 2021).
\68\ Meeting between USA Rare Earth and the Department of
Commerce, (Virtual Meeting, December 10, 2021).
---------------------------------------------------------------------------
Rare earth oxides are then refined into metals, most often through
electrowinning and calcium reduction.\69\ Electrowinning uses a cell
made of anodes and cathodes and an electrolyte, while calcium reduction
relies on sodium metal to reduce anhydrous rare earth salts. Industry
participants indicate that metallization is an energy intensive and
potentially hazardous process.\70\
---------------------------------------------------------------------------
\69\ Thomas Lograsso, Critical Materials Institute, written
communication, May 8, 2022.
\70\ Meeting between Energy Fuels and the Department of
Commerce, (Virtual Meeting, March 1, 2022).
---------------------------------------------------------------------------
Finally, alloys are made by combining selected rare earth metals
with iron and boron. There are two types of alloying approaches
depending on whether they are meant to produce bonded or sintered NdFeB
magnets. Although both sintered and bonded NdFeB magnets use neodymium
and praseodymium, sintered NdFeB magnet alloy includes between 0.5 and
11 percent dysprosium or terbium by weight to improve high-temperature
resistance to demagnetization, while the absence of these elements in
bonded magnets precludes their use in elevated temperature
applications.
Sintered NdFeB magnets are manufactured using powder metallurgy.
For sintered magnets, specific alloys are first produced and melted.
The molten alloy is then poured on the outer surface of a rotating
metal cylinder in a process known as strip casting. After strip
casting, the as-cast strips are jet milled into a powder with small
grains that can be used for magnet production. Jet milling shapes the
grains that define the magnet microstructure and affects the magnet's
performance parameters. The powder is next aligned and pressed in a
magnetic field before being sintered in a high temperature furnace to
form the anisotropic magnets. The magnets are then machined to
specified shapes depending on their end-use and coated with a metal
film to protect the magnet from corrosion. The most common coating is a
nickel-copper-nickel layer, although other coatings use gold, chrome,
copper, and dry-sprayed epoxy or e-coat epoxy. Finally, magnets are
magnetized using a high magnetic field to align the magnetization of
the grains.
Bonded NdFeB magnets follow a similar process to sintered NdFeB
magnets through the production of magnetic powder. Bonded NdFeB magnets
are often made from rapidly solidified material turned into ribbons
through melt-spinning or jet casting, which is subsequently milled, or
from spherical powders through gas or centrifugal atomization.\71\
Bonded NdFeB magnets can also be made from strip cast material after
hydrogen decrepitation.\72\ The rapidly solidified powder feedstock is
then mixed with a binder to form a final shape using compression
bonding, injection molding, or calendaring.\73\ In compression bonding
a liquid coating of thermoset epoxy is applied to the powder, which is
then added to a press cavity and compacted under heat to
[[Page 9440]]
produce a rigid magnet.\74\ Injection molding entails blending powder
with a thermoplastic compound and injecting it into a mold cavity to
form a rigid or flexible magnet.\75\ Calendaring uses a roll press to
form flexible magnet sheets.\76\ Rigid magnets require binders such as
nylon, Teflon, vinyl, and thermoset epoxy, while flexible magnets rely
on binders like nitrile rubber and vinyl.\77\
---------------------------------------------------------------------------
\71\ John J. Croat, ``4--Production of rapidly solidified NdFeB
magnetic powder,'' Rapidly Solidified Neodymium-Iron-Boron Permanent
Magnets, 2018, <a href="https://doi.org/10.1016/B978-0-08-102225-2.00004-1">https://doi.org/10.1016/B978-0-08-102225-2.00004-1</a>;
B.M Ma et al., ``Recent development in bonded NdFeB magnets,''
Journal of Magnetism and Magnetic Materials 239 (1-3): 418-423,
February 2002, <a href="https://doi.org/10.1016/S0304-8853">https://doi.org/10.1016/S0304-8853</a>(01)00609-6.
\72\ John J. Croat, ``Chapter 6--Compression bonded NdFeB
permanent magnets,'' Modern Permanent Magnets, 2022, <a href="https://doi.org/10.1016/B978-0-323-88658-1.00007-8">https://doi.org/10.1016/B978-0-323-88658-1.00007-8</a>.
\73\ Steve Constantinides and John de Leon, ``Permanent Magnet
Materials and Current Challenges, Arnold Magnetic Technologies,
n.d., <a href="http://www.arnoldmagnetics.com/wp-content/uploads/2017/10/Permanent-Magnet-Materials-and-Current-Challenges-Constantinides-and-DeLeon-PowderMet-2011-ppr.pdf">http://www.arnoldmagnetics.com/wp-content/uploads/2017/10/Permanent-Magnet-Materials-and-Current-Challenges-Constantinides-and-DeLeon-PowderMet-2011-ppr.pdf</a>; Jun Cui et al., ``Manufacturing
Processes for Permanent Magnets: Part II--Bonding and Emerging
Methods,'' JOM 74: 2492-2506, June 2022, <a href="https://doi.org/10.1007/s11837-022-05188-1">https://doi.org/10.1007/s11837-022-05188-1</a>.
\74\ Ibid.
\75\ Ibid.
\76\ Ibid.
\77\ John Ormerod, ``Bonded Magnets: A Versatile Class of
Permanent Magnets,'' Magnetics Business and Technology, 2015,
<a href="https://bunting-dubois.com/wp-content/uploads/2021/04/Magnetics-Business-Technology-Summer-2015-8-9.pdf">https://bunting-dubois.com/wp-content/uploads/2021/04/Magnetics-Business-Technology-Summer-2015-8-9.pdf</a>.
---------------------------------------------------------------------------
5.2 Rare Earth Element Losses in Magnet Production
It is difficult to estimate rare earth element losses from the
mining to metallization value chain steps. Rare earth recovery from ore
is complex since there are a variety of different rare earth minerals
including bastnaesite, monazite, and ionic clays.\78\ Additionally, the
process of concentrating rare earth bearing ore is tailored to specific
ore deposits.\79\ Once the rare earth elements are concentrated, they
are generally chemically leached into solution. Depending on the
specific leaching technology utilized and the technological
optimization of the process stream, recovery of rare earth elements in
bastnaesite ranges from 85 to 90 percent, in monazite from 89 to 98
percent, and in ionic clays from 80 to 90 percent.\80\ As discussed in
the previous section, various approaches, including solvent extraction,
are employed to separate individual rare earth elements from mixed
carbonates or mixed oxides. Total recovery of rare earth elements
during solvent extraction is typically 90 to 95 percent depending on
the specific process and strategy utilized.\81\ Individual rare earth
oxides are turned into metal using electrowinning and calcium
reduction.<SUP>82 83</SUP> Although specific data on the efficiency of
electrowinning of individual rare earth elements could not be
identified, the electrowinning process generally exhibits a 90 to 95
percent metal recovery rate.\84\
---------------------------------------------------------------------------
\78\ On sources of rare earth elements, see ``Rare Earth
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of
Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\79\ Meeting between Lynas Rare Earths and the Department of
Commerce, (Virtual Meeting, March 30, 2022); Meeting between USA
Rare Earth and the Department of Commerce, (Virtual Meeting,
December 10, 2021).
\80\ Sebastiaan Peelman et al., ``Leaching of Rare Earth
Elements: Past and Present,'' ERES2014: 1st European Rare Earth
Resources Conference, September 4 to 7, 2014, <a href="http://www.eurare.org/docs/eres2014/seventhSession/SebastiaanPeelman.pdf">http://www.eurare.org/docs/eres2014/seventhSession/SebastiaanPeelman.pdf</a>; Sebastiaan
Peelman et al., ``Chapter 21: Leaching of Rare Earth Elements:
Review of Past and Present Technologies,'' Rare Earths Industry:
Technological, Economic, and Environmental Implications: 319-334,
2016, <a href="https://doi.org/10.1016/B978-0-12-802328-0.00021-8">https://doi.org/10.1016/B978-0-12-802328-0.00021-8</a>.
\81\ Laura Talens Peiro and Gara Villalba Mendez, ``Material and
Energy Requirement for Rare Earth Production,'' JOM 65: 1327-1340,
2013, <a href="https://doi.org/10.1007/s11837-013-0719-8">https://doi.org/10.1007/s11837-013-0719-8</a>.
\82\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\83\ Thomas Lograsso, Critical Materials Institute, written
communication, May 8, 2022.
\84\ Danielle Miousse, ``A New Spin on Electrowinning,'' PF
Products Finishing, May 1, 2007, <a href="https://www.pfonline.com/articles/a-new-spin-on-electrowinning">https://www.pfonline.com/articles/a-new-spin-on-electrowinning</a>.
---------------------------------------------------------------------------
There is more information on material losses from alloying to
magnet production.\85\ Metal recovery from strip casting, used to
produce NdFeB alloy, is estimated at 97 percent. Hydrogen decrepitation
and jet milling, which are used to make NdFeB powder, have estimated
recovery rates of 99 percent. Pressing in a magnetic field, which is
used to produce the sintered magnet, has a 99 percent recovery rate,
while the subsequent sintering and heat-treating steps have 98 percent
recovery rates. The greatest material loss occurs when machining the
sintered magnet block into a usable magnet according to end-use-
determined specifications. Depending on the size and complexity of the
final magnet machining has a recovery rate of 60 to 90 percent.
Although considerable material is lost during the magnet machining
step, the resulting waste, also known as magnet swarf, is often
recycled and returns to the process flow stream.\86\ Indeed, some
industry participants question the viability of magnet manufacturing
that does not recycle swarf.\87\ The final steps in NdFeB magnet
manufacturing are plating for corrosion and final magnetization, both
of which have a yield of 99 percent. As a result, total recovery from
alloy to magnet production can range from about 54 to 81 percent.\88\
---------------------------------------------------------------------------
\85\ Unless otherwise noted, this paragraph summarizes
information in a Department of Energy report on the NdFeB magnet
supply chain. See ``Rare Earth Permanent Magnets: Supply Chain Deep
Dive Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\86\ Meeting between Lynas Rare Earths and the Department of
Commerce, (Virtual Meeting, March 30, 2022).
\87\ Ibid.
\88\ The Department reached this calculation using the
information on material loss from alloy to magnet production
discussed in earlier in the paragraph.
---------------------------------------------------------------------------
6. U.S. NdFeB Magnet Industry
6.1 Historical Overview
The United States is essentially one hundred percent dependent on
imports of NdFeB magnets to satisfy demand. However, the United States
did not always have negligible capacity in the NdFeB magnet value
chain. Rare earths were first discovered at Mountain Pass in California
in 1949 and extracted by the mining firm Molycorp beginning in
1951.\89\ In the 1950s, research by the Ames Laboratory advanced rare
earths processing technology.\90\ The combination of favorable factor
endowments and research and development caused the U.S. rare earths
industry to flourish. By the 1980s, Mountain Pass supplied over 70
percent of the world's rare earth elements.\91\ Meanwhile,
commercialized processing technologies facilitated rare earth oxide
production and consumption by a growing array of end-users.\92\ NdFeB
magnet manufacturers were one such consumer: in 1983, General Motors
and Sumitomo of Japan independently announced the development of NdFeB
magnets.\93\ In 1986 General Motors established a subsidiary called
Magnequench to commercialize production.\94\ Magnequench began
production of rapidly solidified powders for isotropic bonded magnets,
full dense hot pressed isotropic magnets, and fully dense anisotropic
magnets in 1987.<SUP>95 96</SUP>
---------------------------------------------------------------------------
\89\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its
Growth and Decline,'' Journal of Policy History 26 (2): 139-166,
2014, <a href="https://doi.org/10.1017/S0898030614000013">https://doi.org/10.1017/S0898030614000013</a>.
\90\ Ibid.
\91\ Ibid.
\92\ Ibid.
\93\ Ibid.
\94\ Jeffrey St. Clair, ``The Saga of Magnequench,''
Counterpunch, April 7, 2006, <a href="https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/">https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/</a>.
\95\ Ibid.
\96\ V. Panchanathan, ``Magnequench Magnets Status Overview,''
Journal of Materials Engineering and Performance, 4 (4) 423-429,
1995, <a href="https://doi.org/10.1007/BF02649302">https://doi.org/10.1007/BF02649302</a>.
---------------------------------------------------------------------------
However, the 1980s were marked by growing foreign competition that
presaged the end of the U.S. rare earths industry. By 1985 Japan had
already exceeded the United States in NdFeB magnet production and by
1987 produced over half the world's magnets.\97\ Starting in the second
half of
[[Page 9441]]
the 1980s, several U.S. magnet companies licensed Sumitomo patents to
produce and sell sintered NdFeB magnets.\98\ In the 1980s, China also
began to develop its rare earth and NdFeB magnet industries. A
combination of low labor costs, less stringent environmental
regulations, and tax rebates and subsidies made it difficult for U.S.
firms to compete.\99\ In response to imports of unlicensed Chinese
magnets, in 1995 U.S. magnet manufacturer Crucible Materials filed a
complaint with the U.S. International Trade Commission (U.S. ITC)
requesting a section 337 investigation.\100\ Although the U.S. ITC
found a violation and issued a cease-and-desist order to a domestic
respondent as well as a general exclusion order, these actions did not
prevent the offshoring of domestic industry.\101\ In 1998, Molycorp
suspended operation at Mountain Pass Mine, ending U.S. involvement in
the upstream steps of the NdFeB magnet value chain.\102\ The downstream
steps of the value chain followed. For example, after being sold to
Chinese owners Magnequench's U.S. factories were closed and offshored
starting in 1998, and it eventually ceased U.S. production in
2006.\103\ Similarly, in 2005, Hitachi closed its sintered NdFeB magnet
manufacturing facility in Edmore, MI, which it had previously acquired
from General Electric.\104\
---------------------------------------------------------------------------
\97\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its
Growth and Decline,'' Journal of Policy History 26 (2): 139-166,
2014, <a href="https://doi.org/10.1017/S0898030614000013">https://doi.org/10.1017/S0898030614000013</a>.
\98\ John Ormerod, ``NdFeB Magnet Patents: Updated 2021,''
Bunting, n.d., <a href="https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/">https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/</a>.
\99\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its
Growth and Decline,'' Journal of Policy History 26 (2): 139-166,
2014, <a href="https://doi.org/10.1017/S0898030614000013">https://doi.org/10.1017/S0898030614000013</a>.
\100\ John Ormerod, ``NdFeB Magnet Patents: Updated 2021,''
Bunting, n.d., <a href="https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/">https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/</a>; ``Certain Neodymium-Iron-Boron Magnets, Magnet
Alloys, and Articles Containing Same: Investigation No. 337-TA-
372,'' U.S. International Trade Commission, May 1996, <a href="https://usitc.gov/publications/337/pub2964.pdf">https://usitc.gov/publications/337/pub2964.pdf</a>.
\101\ Ibid.
\102\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its
Growth and Decline,'' Journal of Policy History 26 (2): 139-166,
2014, <a href="https://doi.org/10.1017/S0898030614000013">https://doi.org/10.1017/S0898030614000013</a>.
\103\ Jeffrey St. Clair, ``The Saga of Magnequench,''
Counterpunch, April 7, 2006, <a href="https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/">https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/</a>.
\104\ Walter Benecki, ``Magnetics Industry Overview,'' 2005,
<a href="http://www.waltbenecki.com/uploads/Another_Year_of_Significant_Change_in_the_Magnetics_Industry.pdf">http://www.waltbenecki.com/uploads/Another_Year_of_Significant_Change_in_the_Magnetics_Industry.pdf</a>.
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The U.S. NdFeB magnet value chain experienced a brief revival in
the late 2000s and early 2010s, in part due to rising rare earths
prices.\105\ In 2008, Molycorp sought to restart production at Mountain
Pass Mine.\106\ When China dramatically restricted exports of rare
earths in 2010 and prices increased, Molycorp appeared poised to
benefit.<SUP>107 108</SUP> In 2012 it acquired Magnequench, which at
the time had NdFeB magnet powder facilities in China and Thailand, in
order to create a vertically integrated mine to magnet
firm.<SUP>109 110</SUP> By 2013 it had achieved domestic production of
5,500 tons of rare earth oxides and had established a joint venture
with Mitsubishi and Daido Steel to produce magnets in
Japan.<SUP>111 112 113</SUP> However, Molycorp struggled to remain
solvent and suffered from the decline in rare earths prices that
occurred in part due to China's reversal of its export restrictions,
ultimately declaring bankruptcy in 2015.<SUP>114 115</SUP> The United
States has in recent years been highly reliant (well above 80 percent)
on imports of bonded NdFeB magnets and essentially one hundred percent
dependent on imports of sintered NdFeB magnets.
---------------------------------------------------------------------------
\105\ See Section 8.3.4, ``Prices and Price Volatility,'' for
more details on neodymium oxide and metal prices.
\106\ Jeffrey A. Green, ``The collapse of American rare earth
mining--and lessons learned,'' Defense News, November 12, 2019,
<a href="https://www.defensenews.com/opinion/commentary/2019/11/12/the-collapse-of-american-rare-earth-mining-and-lessons-learned/">https://www.defensenews.com/opinion/commentary/2019/11/12/the-collapse-of-american-rare-earth-mining-and-lessons-learned/</a>.
\107\ China implemented export quotas starting in 2005, but
dramatically decreased the export quota by almost 40 percent in
2010. China's export quotas are broadly seen as part of a strategy
of economic resource nationalism, wherein economic advantage can be
transferred from foreign to local firms, although some argue they
reflect an effort to gain a geopolitical advantage. China itself
contended quotas were meant to decrease environmental costs, but
this argument was rejected by the WTO in 2014. See Kristen Vekasi,
``Politics, markets, and rare commodities: Responses to Chinese rare
earth policy,'' Japanese Journal of Political Science 20 (1): 2-20,
2019, <a href="https://doi.org/10.1017/S1468109918000385">https://doi.org/10.1017/S1468109918000385</a>.
\108\ Neodymium oxide prices rose by over 1,200 percent from
$27.95 per kg at the end of January 2010 to a peak of $369.75 at per
kg at the end of July 2011. The Department's calculations from
Bloomberg data. See Section 8.3.4, ``Prices and Price Volatility,''
for more details.
\109\ Artem Golev et al., ``Rare earths supply chains: Current
status, constraints, and opportunities,'' Resources Policy 41: 52-
59, 2014, <a href="http://dx.doi.org/10.1016/j.resourpol.2014.03.004">http://dx.doi.org/10.1016/j.resourpol.2014.03.004</a>.
\110\ Magnequench was later acquired by Neo Performance
Materials after Molycorp's bankruptcy.
\111\ Eugene Gholz, ``Rare Earth Elements and National
Security,'' Council on Foreign Relations, October 2014, <a href="https://cdn.cfr.org/sites/default/files/pdf/2014/10/Energy%20Report_Gholz.pdf">https://cdn.cfr.org/sites/default/files/pdf/2014/10/Energy%20Report_Gholz.pdf</a>.
\112\ Joseph Gambogi, ``Mineral Commodity Summaries: Rare
Earths,'' U.S. Geological Survey, January 2017, <a href="https://d9-wret.s3.us-west-2.amazonaws.com/assets/palladium/production/mineral-pubs/rare-earth/mcs-2017-raree.pdf">https://d9-wret.s3.us-west-2.amazonaws.com/assets/palladium/production/mineral-pubs/rare-earth/mcs-2017-raree.pdf</a>.
\113\ All quantities specified as tons in this report refer to
metric tons, unless otherwise noted.
\114\ Tiffany Hsu, ``Molycorp--sole U.S. rare earth producer--
files for bankruptcy,'' Los Angeles Times, June 25, 2015, <a href="https://www.latimes.com/business/la-fi-molycorp-rare-earth-bankruptcy-20150625-story.html">https://www.latimes.com/business/la-fi-molycorp-rare-earth-bankruptcy-20150625-story.html</a>.
\115\ When Molycorp declared bankruptcy in June 2015, neodymium
oxide prices were down by over 88 percent to $43.00 per kg from a
peak of $369.75 per kg in July 2011. The Department's calculations
from Bloomberg data. See Section 8.3.4, ``Prices and Price
Volatility,'' for more details.
---------------------------------------------------------------------------
6.2 U.S. Demand
As one of the strongest types of permanent magnets, NdFeB magnets,
in particular sintered NdFeB magnets, are used in an extensive range of
products. Example applications include actuators for machine tools,
robots, and water pumps, refrigerator and air conditioner compressors,
speakers in phones and laptops (as well as more advanced applications
in computing and telecommunications), and traction motors in electric
vehicles.
The Department of Energy's (DoE) ``Rare Earth Permanent Magnets:
Supply Chain Deep Dive Report'' estimates total domestic demand for
selected NdFeB magnet applications in aggregate and by broad
application area, as detailed in Table 2.<SUP>116 117</SUP> It
estimated total consumption at about 16,100 tons in 2020. Based on DoE
estimates, total U.S. demand for NdFeB magnets for these applications
is projected to increase under a high growth scenario to 37,000 tons in
2030, with the bulk of increasing demand accounted for by offshore wind
turbines and electric vehicles.
---------------------------------------------------------------------------
\116\ The Department notes that the global NdFeB magnet supply
chain is opaque and as a result valid and reliable estimates of
total as well as direct and embedded demand are difficult to
generate, both in aggregate and at the end-use-level. [TEXT
REDACTED]. Estimates of total, direct, and embedded demand in
aggregate and by end-use category should be approached with caution.
\117\ The DoE report and the figures provided in this report
reflect total demand, in other words the sum of direct and indirect
or embedded demand, for selected NdFeB magnet applications.
[[Page 9442]]
Table 2--Total U.S. Demand for Selected NdFeB Magnet Applications, Thousands of Tons *
----------------------------------------------------------------------------------------------------------------
Total demand in 2020 Projected total Projected total
---------------------- demand in 2030 (high demand in 2050 (high
growth) growth)
Application Amount Share -------------------------------------------
(kt) (percent) Amount Share Amount Share
(kt) (percent) (kt) (percent)
----------------------------------------------------------------------------------------------------------------
Offshore wind turbines........................ 0 0.0 10.1 27.3 19 27.7
Electric vehicles............................. 1.8 11.2 10.2 27.6 23.1 33.7
Consumer electronics (hard disk drives, cell 7.2 44.7 7.4 20.0 11.8 17.2
phones, loudspeakers, other).................
Industrial motors............................. 4.9 30.4 5.9 15.9 9.5 13.8
Non-drivetrain motors in vehicles............. 1.5 9.3 2.4 6.5 3.9 5.7
Other sintered magnets (Power tools, electric 0.1 0.6 0.1 0.3 0.2 0.3
bikes).......................................
Bonded magnets................................ 0.6 3.7 0.8 2.2 1.3 1.9
-----------------------------------------------------------------
Total..................................... 16.1 100.0 37 100.0 68.6 100.0
----------------------------------------------------------------------------------------------------------------
* The figures presented represent total--or the sum of direct and embedded--demand.
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24,
2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
Since U.S. production of NdFeB magnets is minimal almost all the
United States' direct and indirect NdFeB magnet consumption is met
through imports.\118\ The United States directly imported about 7,500
tons of sintered NdFeB magnets in 2021.\119\ However, direct imports of
NdFeB magnets represent only a portion of U.S. consumption and the
majority of U.S. demand is in the form of imported products with the
magnets embedded in them. As the list of imported goods containing
NdFeB magnets is extensive, and their magnet content (weight and type)
unknown, it is difficult to precisely estimate indirect consumption by
application. The Defense Logistics Agency Strategic Materials estimates
60 percent of essential civilian demand for NdFeB magnets was fulfilled
through embedded imports, [TEXT REDACTED].<SUP>120 121</SUP>
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\118\ U.S. imports and exports of NdFeB magnets are further
discussed in Section 6.4, ``U.S. Trade in NdFeB Magnets.''
\119\ ``USITC Dataweb,'' U.S. International Trade Commission,
last modified October 25, 2021, <a href="https://dataweb.usitc.gov/trade/search/Import/HTS">https://dataweb.usitc.gov/trade/search/Import/HTS</a>.
\120\ ``Building Resilient Supply Chains, Revitalizing American
Manufacturing, and Fostering Broad-Based Growth,'' The White House,
June 2021, <a href="https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf</a>.
\121\ Meeting between the Defense Logistics Agency and the
Department of Commerce (Virtual Meeting, November 23, 2021).
---------------------------------------------------------------------------
6.3 NdFeB Magnets in Defense and Critical Infrastructure Applications
Presidential Policy Directive 21 (Critical Infrastructure Security
and Resilience) designates 16 critical infrastructure sectors as vital
to national security, national economic security, and/or national
public health and safety.\122\ NdFeB magnets are used so extensively
across industries that they support virtually all 16 sectors, including
the critical manufacturing, defense industrial base, energy, healthcare
and public health, transportation systems, and water and wastewater
systems sectors. The following sections will discuss the use of NdFeB
magnets in defense applications and two key critical infrastructure
applications: electric vehicles and offshore wind turbines. Defense-
related uses and demand are central to the investigation's directive to
assess the effects of NdFeB magnet imports on national security.
Electric vehicles and offshore wind turbines are important to the Biden
Administration's Clean Energy Plan and efforts to combat climate
change. They will also drive demand for NdFeB magnets and are key sales
targets for NdFeB magnet manufacturers.
---------------------------------------------------------------------------
\122\ ``Critical Infrastructure Sectors,'' Department of
Homeland Security, last modified October 21, 2020, <a href="https://www.cisa.gov/critical-infrastructure-sectors">https://www.cisa.gov/critical-infrastructure-sectors</a>.
---------------------------------------------------------------------------
6.3.1 Defense Applications
Consistent with their broad commercial applications, NdFeB magnets
are used in a variety of defense end-uses.\123\ Defense usage is not
limited to specific magnet characteristics such as high coercivity.
Instead, each defense application requires a specially designed magnet,
of varying sizes, grades, and performance characteristics. [TEXT
REDACTED]. Aircraft, missiles, and munitions use small high-powered
rare earth magnet actuators that control the various surfaces during
operation. NdFeB magnets can also be used as fasteners. Although
substitutes can be used in some applications, they are usually not as
effective.\124\
---------------------------------------------------------------------------
\123\ [TEXT REDACTED].
\124\ ``Defense Federal Acquisition Regulation Supplement:
Restriction on the Acquisition of Certain Magnets and Tungsten,''
Federal Register, April 30, 2019. <a href="https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets">https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets</a>?msclkid=9f790985ac5011eca53be28a54128eac.
[TEXT REDACTED]
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[TEXT REDACTED] \125\
----------------------------------------------------------------------------------------------------------------
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----------------------------------------------------------------------------------------------------------------
[TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
As with total domestic consumption of NdFeB magnets, a precise
total for defense-related demand is not possible. [TEXT REDACTED].\126\
Thus, despite their importance to national security, defense demand for
NdFeB magnets is only a small portion of overall demand and
insufficient to support an economically viable domestic industry.
---------------------------------------------------------------------------
\125\ [TEXT REDACTED].
\126\ [TEXT REDACTED], Noveon's Federal Register Notice
submission estimated defense-related demand at two to ten percent.
Comments of Noveon to Request for Public Comments, ``Section 232
National Security Investigation of Imports of Neodymium-Iron-Boron
(NdFeB) Permanent Magnets,'' 86 FR 53277, November 12, 2021.
---------------------------------------------------------------------------
6.3.2 U.S. Government Actions To Reduce Defense Dependencies
Given NdFeB magnets' usage in and importance to the performance of
myriad military systems, and the United States' near one hundred
percent reliance on imports of NdFeB magnets, the U.S. Government has
taken several steps in recent years to mitigate this reliance and
address potential supply disruptions. One such measure is legislation
implemented through a Defense Federal Acquisition Regulation Supplement
(DFARS) that restricts the use of foreign NdFeB magnets in the military
supply chain from 2019.\127\ Specifically, section 871 of the National
Defense Authorization Act for 2019 (Pub. L. 115-232) prohibits the
acquisition of samarium-cobalt and NdFeB magnets melted or produced in
North Korea, China, Russia, or Iran because these materials play an
essential role in national defense. This requirement was originally
codified in 10 U.S.C. 2533c but is now 10 U.S.C. 4872. There are
exceptions for ``some commercially available off-the-shelf magnets
incorporated into end items and for electronic devices,'' as well as
for recycled magnets where the first melt may have taken place in China
but subsequent recycling and milling takes place in the United
States.\128\
---------------------------------------------------------------------------
\127\ For more information, please refer to the Federal Register
Notice of the rule. ``Defense Federal Acquisition Regulation
Supplement: Restriction on the Acquisition of Certain Magnets and
Tungsten,'' Federal Register, April 30, 2019, <a href="https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets">https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets</a>.
\128\ Ibid.
---------------------------------------------------------------------------
The Department of Defense's (DoD) Office of Industrial Base Policy
has fostered domestic production capacity across the NdFeB magnet value
chain from mining to magnet manufacturing through the allocation of
funding under DPA Title III and the Industrial Base Analysis and
Sustainment (IBAS) programs. Other important DoD funding sources for
rare earth supply chain research and scale-up include the National
Defense Stockpile Program, the Rapid Innovation Fund, and the Small
Business Innovation Research (SBIR) program.
Upstream in the NdFeB magnet value chain, DoD has funded the
development of oxide separation capacity. In February 2021, Lynas USA
LLC, a subsidiary of Australian mining firm Lynas Rare Earths, received
$30.4 million to establish a facility to produce light rare earth
oxides, including neodymium.<SUP>129 130</SUP> [TEXT REDACTED]. This
facility is also expected to produce heavy rare earth oxides such as
dysprosium.\131\ [TEXT REDACTED].\132\ In February 2022, DoD awarded MP
Materials $35 million under the IBAS program for a heavy rare earth
oxide separation facility, on top of a previous $9.6 million commitment
in December 2020 to develop light rare earth oxide separation
capabilities.\133\ MP Materials expects to commence production by the
end of 2022.\134\ DoD has also provided
[[Page 9444]]
funding for NdFeB magnet production. In July 2020, under DPA Title III,
Noveon was provided $28.8 million to develop NdFeB magnet
manufacturing, which will begin in 2022 and ramp up thereafter.\135\
Noveon later received $0.86 million for an inventory
demonstration.\136\ In November 2020, DoD also provided $2.3 million in
DPA Title III funding to TDA Magnetics for a rare earth element supply
chain study.\137\
---------------------------------------------------------------------------
\129\ ``DoD Announces Rare Earth Element Award to Strengthen
Domestic Industrial Base,'' Department of Defense, February 1, 2021,
<a href="https://www.defense.gov/News/Releases/Release/Article/2488672/dod-announces-rare-earth-element-award-to-strengthen-domestic-industrial-base/">https://www.defense.gov/News/Releases/Release/Article/2488672/dod-announces-rare-earth-element-award-to-strengthen-domestic-industrial-base/</a>.
\130\ Unless otherwise stated, all values cited in this report
are U.S. dollars.
\131\ ``2021 Annual Report,'' Lynas Rare Earths, Ltd., 2021,
<a href="https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf">https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf</a>.
\132\ Meeting between Lynas Rare Earths and the Department of
Commerce, (Virtual Meeting, March 30, 2022).
\133\ ``MP Materials Awarded Department of Defense Heavy Rare
Earth Processing Contract,'' MP Materials, February 2, 2022, <a href="https://investors.mpmaterials.com/investor-news/news-details/2022/MP-Materials-Awarded-Department-of-Defense-Heavy-Rare-Earth-Processing-Contract/default.aspx">https://investors.mpmaterials.com/investor-news/news-details/2022/MP-Materials-Awarded-Department-of-Defense-Heavy-Rare-Earth-Processing-Contract/default.aspx</a>.
\134\ ``Form 10-K,'' MP Materials, February 28, 2022, <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf">https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf</a>.
\135\ ``DoD Announces $77.3 Million in Defense Production Act
Title III COVID-19 Actions,'' Department of Defense, July 24, 2020,
<a href="https://www.defense.gov/News/Releases/Release/Article/2287490/dod-announces-773-million-in-defense-production-act-title-iii-covid-19-actions/">https://www.defense.gov/News/Releases/Release/Article/2287490/dod-announces-773-million-in-defense-production-act-title-iii-covid-19-actions/</a>.
\136\ ``DoD Announces Rare Earth Element Awards to Strengthen
Domestic Industrial Base,'' Department of Defense, November 17,
2020, <a href="https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/">https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/</a>.
\137\ Ibid.
---------------------------------------------------------------------------
The U.S. Government also funded projects related to the NdFeB
magnet value chain through the SBIR program.\138\ SBIR provides funding
on a competitive basis to encourage high technology innovation by small
businesses with less than 500 employees. In general, funding of up to
$275,000 over a six month to one year period is granted for Phase I
projects (i.e., projects at the technical assessment and feasibility
stage), and up to $1.8 million over a two-year period for Phase II
projects (to allow for continued research and development after a
successful Phase I). Like other federal awards, SBIR contracts allocate
intellectual property rights between the U.S. Government and the
awardee according to a detailed regulatory regime. A typical SBIR
patent rights clause generally permits the SBIR awardee to retain
ownership of inventions, but grants the U.S. Government a ``non-
exclusive, nontransferable, irrevocable paid-up license to practice the
subject invention throughout the world.'' \139\
---------------------------------------------------------------------------
\138\ Information in this paragraph is drawn from the SBIR
website. See ``SBIR,'' Small Business Administration, n.d., <a href="https://www.sbir.gov/?msclkid=fddb897aac5011ec87c1465b3f85f68e">https://www.sbir.gov/?msclkid=fddb897aac5011ec87c1465b3f85f68e</a>.
\139\ ``37 CFR 401.14--Standard patent rights clauses,'' Cornell
Law School Legal Information Institute, n.d., <a href="https://www.law.cornell.edu/cfr/text/37/401.14">https://www.law.cornell.edu/cfr/text/37/401.14</a>.
---------------------------------------------------------------------------
In 2020 and 2021, SBIR awards directly related to neodymium were
made to ten organizations--DoD units funded three of these, and DoE
units funded seven. Projects included novel separation and metal
reduction technologies, as well as recycling/reclaiming rare earths and
magnets from end-of-life products and waste feedstocks. Additional
projects focused on the development of electric motors that are free of
rare earth elements or have reduced rare earth element content. If
expanded to include SBIR awards related more broadly to rare earth
elements, the total number of projects funded increases to 52 in 2020
and 2021 alone, and over 300 over the history of the SBIR program.
In one example, the Defense Logistics Agency--Strategic Materials
is leveraging SBIR funding and Rapid Innovation Funding to accelerate
the development of new rare earth processing technologies through a
grant to Rare Earth Salts.\140\ Rare Earth Salts will use this money to
scale production of separate rare earth oxides to 20 tons of neodymium-
praseodymium at its facility in Beatrice, NE. Using a unique
separations process, Rare Earth Salts claims it can separate and refine
all seventeen rare earth elements, providing DoD with a viable
alternative to foreign sources.\141\
---------------------------------------------------------------------------
\140\ ``DOD Announces Rare Earth Element Awards to Strengthen
Domestic Industrial Base,'' Department of Defense, November 17,
2020, <a href="https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/msclkid/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/">https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/msclkid/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/</a>.
\141\ ``Defense Logistics Agency Research and Development: Small
Business Innovation Programs,'' Defense Logistics Agency, n.d. 2022,
<a href="https://www.dla.mil/Portals/104/Documents/SmallBusiness/Always%20Accountable%20Program%20Sheet_10%20NOV%202020.pdf?ver=2A6BDQejXejBr5xDhoLDyQ%3D%3D">https://www.dla.mil/Portals/104/Documents/SmallBusiness/Always%20Accountable%20Program%20Sheet_10%20NOV%202020.pdf?ver=2A6BDQejXejBr5xDhoLDyQ%3D%3D</a>.
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DoE has also provided funding related to the NdFeB magnet value
chain. For example, DoE has advanced research on recovering rare earths
from unconventional sources, including coal, coal byproducts, and other
waste materials.\142\ Through basic and applied research conducted in
DoE labs, small businesses, and universities, DoE was able to establish
pilot scale facilities capable of producing small quantities of high
purity, mixed rare earth oxides. DoE expanded this program in 2020 in
response to Executive Order 13817 to include upstream beneficiation
yielding mixed rare earth oxides, midstream processing, separation,
recovery of rare earth elements and critical minerals, and ultimately
onshore downstream manufacturing that incorporates these materials into
consumer and national defense products. In 2021, efforts were initiated
that address the development of innovative, cost-reduced processing for
the separation of mixed rare earth elements into individual, high
purity oxides, and reduction of these materials to metals for use in
alloy production, advanced technology development, and component
manufacturing. The final goal is to produce one to three tons a day of
mixed rare earth oxides and metals in prototype separation facilities
by 2026.
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\142\ Information in this paragraph is drawn from a DoE document
describing the program. See ``Rare Earth Elements and Critical
Minerals,'' National Energy Technology Laboratory, February 2022,
<a href="https://www.netl.doe.gov/sites/default/files/2022-02/Program-141.pdf">https://www.netl.doe.gov/sites/default/files/2022-02/Program-141.pdf</a>.
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In April 2021, DoE, through the National Energy Technology
Laboratory, announced $19 million in grants to support production of
rare earth elements and critical minerals vital to manufacturing
batteries, magnets, and other products important to the clean energy
economy.\143\ The grants, of up to $1.5 million each, were allocated to
13 projects across the country to assess resources and extract and
process rare earth elements and critical minerals in traditionally
fossil-fuel producing communities. Not only will these initiatives help
alleviate shortages in domestic supply and place the United States at
the forefront of the clean energy economy, but they support regional
economic growth and job creation in economically distressed
communities. Many of these projects relate to reclaiming and processing
rare earth elements from coal mine-derived waste.
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\143\ The information in this paragraph is drawn from a DoE
press announcement. See ``DOE Awards $19 Million for Initiatives to
Produce Rare Earth Elements and Critical Minerals,'' Department of
Energy, April 29, 2021, <a href="https://www.energy.gov/articles/doe-awards-19-million-initiatives-produce-rare-earth-elements-and-critical-minerals">https://www.energy.gov/articles/doe-awards-19-million-initiatives-produce-rare-earth-elements-and-critical-minerals</a>.
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6.3.3 NdFeB Magnets, Climate Change, and the National Security
The Department of Defense, the Department of Homeland Security, the
National Security Council, and the Director of National Intelligence
have identified climate change as a threat to national security.
Climate-fueled events and scarce resources create instability,
heightened military tensions, and financial hazards which can lead to
worsening conflicts between countries.\144\ Climate change and extreme
weather events may also significantly increase the dislocation and
migration of people.\145\ Climate
[[Page 9445]]
change is an existential crisis that poses a grave threat to the United
States and the international community. To address this crisis,
President Biden established a national goal to achieve net-zero carbon
emissions by 2050.\146\ Transitioning away from gas powered to electric
vehicles is an important part of U.S. and global efforts to address
climate change by slashing greenhouse gas emissions, and NdFeB magnets
are key to electric vehicle performance. In addition, NdFeB magnets
power offshore wind turbine generators, which are another key element
in achieving clean energy goals.
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\144\ Christopher Flavelle et al., ``Climate Change Poses a
Widening Threat to National Security,'' The New York Times, October
21, 2021, <a href="https://www.nytimes.com/2021/10/21/climate/climate-change-national-security.html">https://www.nytimes.com/2021/10/21/climate/climate-change-national-security.html</a>.
\145\ Renee Cho, ``Climate Migration: An Impending Global
Challenge,'' Columbia Climate School, May 13, 2021, <a href="https://news.climate.columbia.edu/2021/05/13/climate-migration-an-impending-global-challenge/">https://news.climate.columbia.edu/2021/05/13/climate-migration-an-impending-global-challenge/</a>; David J. Kazcan and Jennifer Orgill-Meyer, ``The
impact of climate change on migration: a synthesis of recent
empirical insights,'' Climatic Change 158: 281-300, 2020, <a href="https://doi.org/10.1007/s10584-019-02560-0">https://doi.org/10.1007/s10584-019-02560-0</a>; ``Groundswell Part 2: Acting on
International Climate Migration,'' World Bank, September 13, 2021,
<a href="https://openknowledge.worldbank.org/handle/10986/36248">https://openknowledge.worldbank.org/handle/10986/36248</a>.
\146\ See ``Fact Sheet: President Biden Signs Executive Order
Catalyzing America's Clean Energy Economy Through Federal
Sustainability,'' The White House, December 8, 2021, <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/08/fact-sheet-president-biden-signs-executive-order-catalyzing-americas-clean-energy-economy-through-federal-sustainability/">https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/08/fact-sheet-president-biden-signs-executive-order-catalyzing-americas-clean-energy-economy-through-federal-sustainability/</a>.
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6.3.4 Electric Vehicles
Although the United States currently lags many other countries in
the percentage of vehicles sold that are electric, President Biden has
set a goal that by 2030 half of all new vehicles sold will be
electric.\147\ This will reduce greenhouse gas emissions by more than
60 percent over 2020 levels and positions the country to be a leader in
the automobile manufacturing of the future. Funds have already been
dedicated to advancing the domestic electric vehicle industry and key
components such as batteries.
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\147\ See ``Executive Order on Strengthening American Leadership
in Clean Cars and Trucks,'' The White House, August 5, 2021, <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/08/05/executive-order-on-strengthening-american-leadership-in-clean-cars-and-trucks/">https://www.whitehouse.gov/briefing-room/presidential-actions/2021/08/05/executive-order-on-strengthening-american-leadership-in-clean-cars-and-trucks/</a>; ``Fact Sheet: President Biden Announces Steps to Drive
American Leadership Forward on Clean Cars and Trucks,'' The White
House, August 5, 2021, <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/05/fact-sheet-president-biden-announces-steps-to-drive-american-leadership-forward-on-clean-cars-and-trucks/">https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/05/fact-sheet-president-biden-announces-steps-to-drive-american-leadership-forward-on-clean-cars-and-trucks/</a>
.
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The global transition to electric vehicles is expected to lead to a
rapid increase in demand for NdFeB magnets. Although automobile
manufacturers can use non-NdFeB magnet motors, up to 95 percent of
electric vehicles use rare earth magnets in their traction drive
motors.\148\ NdFeB magnets are highly desirable in traction drive
motors because they provide high energy efficiency which allows for
increased driving range. Electric vehicle drive train motors typically
require higher grade NdFeB magnets (using six percent or more of
dysprosium) due to the high temperature environment.
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\148\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A
European Call for Action,'' European Raw Materials Alliance,
September 2021, <a href="https://erma.eu/app/uploads/2021/09/01227816.pdf">https://erma.eu/app/uploads/2021/09/01227816.pdf</a>.
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In addition to traction drive motors, NdFeB magnets, often of
lesser grades, are used in various other automotive systems in both
electric and conventional vehicles, including motors for door locks,
mirrors, seat positioning, power steering, alternators, suspension
control, anti-lock brakes, water pumps, and loudspeakers. Most sources
estimate that electric vehicle drive trains use between one and two
kilograms (kgs) of NdFeB magnets, with other applications using smaller
amounts of NdFeB magnets.<SUP>149 150</SUP> NdFeB magnets are a small
percentage of the cost of production. The European Raw Materials
Alliance (ERMA) forecasts that rare earth magnets used in electric
vehicles will account for $2.3 to $3.5 billion out of a global electric
vehicle market of $725 to $1,160 billion, or less than 0.5 percent of
the value of the market.\151\ NdFeB magnets are nonetheless key to
enhancing vehicle performance over non-magnet alternatives.
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\149\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A
European Call for Action,'' European Raw Materials Alliance,
September 2021, <a href="https://erma.eu/app/uploads/2021/09/01227816.pdf">https://erma.eu/app/uploads/2021/09/01227816.pdf</a>;
``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,''
Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>; Steve
Constantinides, ``The Big Picture: Putting the Magnet Market Trends
Together,'' Presentation at Magnetics 2018 at Orlando, FL, February
8, 2018.
\150\ Conventional vehicles also use small amounts of NdFeB
magnets. Estimates of total NdFeB magnet rare earths content ranges
from 4 grams to 356 grams per vehicle. See Ruby T. Nguyen et al.,
``NdFeB content in ancillary motors of U.S. conventional passenger
cars and light trucks: Results from the field,'' Waste Management
83: 209-217, 2019, <a href="https://doi.org/10.1016/j.wasman.2018.11.017">https://doi.org/10.1016/j.wasman.2018.11.017</a>.
\151\ The original figures were quoted in euros: two to three
billion euros for the value of rare earth magnets used in electric
vehicles and 625 to 1000 billion euros for the value of the global
electric vehicle market. These figures were converted into dollars
at an exchange rate of 1.16 euro to the dollar, at the lower end of
the exchange rate in September 2021 when the ERMA forecast was
published, which fluctuated between 1.16 and 1.19 euro to the
dollar. Roland Gaus et al., ``Rare Earth Magnets and Motors: A
European Call for Action,'' European Raw Materials Alliance,
September 2021, <a href="https://erma.eu/app/uploads/2021/09/01227816.pdf">https://erma.eu/app/uploads/2021/09/01227816.pdf</a>.
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The developing electric vehicle industry in the United States, in
addition to the global electric vehicle market, represents a valuable
opportunity for current and potential NdFeB magnet manufacturers. In
one extreme example, if all new vehicle sales in 2040 were electric
vehicles--an estimated 125 million vehicles globally--the global
electric vehicle industry alone would consume at least 156,000 tons of
NdFeB magnets and 342,000 tons of total rare earth oxides.\152\ By
comparison, in 2020 about three million electric vehicles were sold
globally (4.6 percent of total) and electric vehicles consumed 7,300
tons of NdFeB magnets.<SUP>153 154 155</SUP> Consumer preferences,
coupled with government actions to achieve the goal of having half of
vehicles sold in the United States be electric by 2030, constitute a
key opportunity for the nascent U.S. NdFeB magnet industry. If enough
electric vehicle drive trains are manufactured in the United States,
electric vehicles are a potential source of consistent demand that
could sustain a domestic NdFeB magnet industry.\156\ General Motors'
plan to manufacture electric vehicles in the United States and use U.S.
NdFeB magnets is important step in this direction, and similar actions
should be encouraged to ensure the viability of U.S. NdFeB magnet
manufacturers.\157\
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\152\ This figure assumes each electric vehicle consumes 1.25
kgs of NdFeB magnets. This calculation relies on electric vehicle
drive trains only to calculate demand. Actual demand will be higher
because of NdFeB magnet use in ancillary products, such as door
locks and speakers. See Steve Constantinides, ``The Big Picture:
Putting the Magnet Market Trends Together,'' Presentation at
Magnetics 2018 at Orlando, FL, February 8, 2018.
\153\ ``Global EV Outlook 2021,'' International Energy Agency,
April 2021. <a href="https://www.iea.org/reports/global-ev-outlook-2021">https://www.iea.org/reports/global-ev-outlook-2021</a>.
\154\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\155\ The differences in magnet weight per vehicle is likely
attributable to the opacity of NdFeB magnet usage across the sector.
The Department of Energy estimates each electric vehicle drive train
uses between one and two kgs of NdFeB magnets, while Constantinides
(2018) estimates each electric vehicle drive train uses 1.25 kgs of
NdFeB magnets. In addition, as mentioned earlier electric vehicles
also use NdFeB magnets in non-drive train applications. See Steve
Constantinides, ``The Big Picture: Putting the Magnet Market Trends
Together,'' Presentation at Magnetics 2018 at Orlando, FL, February
8, 2018; ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\156\ Indeed, electric vehicles appear to be the key market for
prospective NdFeB magnet manufacturers. For example, potential
market entrants cite the industry as a sales target in public
documents. ``Form 10-k,'' MP Materials, February 28, 2022, <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf">https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf</a>.
\157\ ``Paul A. Eisenstein,'' General Motors to source rare
earth metals domestically for its electric vehicles,'' NBC, December
9, 2021, <a href="https://www.nbcnews.com/business/autos/general-motors-announces-deal-source-rare-earth-metals-electric-vehicl-rcna8265">https://www.nbcnews.com/business/autos/general-motors-announces-deal-source-rare-earth-metals-electric-vehicl-rcna8265</a>.
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[[Page 9446]]
6.3.5 Wind Energy
Wind turbines, particularly offshore wind turbines, also represent
a large growth market for NdFeB magnets. NdFeB magnets are used in wind
turbines' permanent magnet synchronous generators, also referred to as
direct drive generators. Although not all wind turbine systems require
rare earth magnets, they are the preferred choice for offshore wind
turbines due to reduced maintenance costs, generator efficiency, and
generator weight (which allows for the construction of larger, higher
capacity wind turbines).\158\ Each wind turbine can use a ton or more
of NdFeB magnets.\159\ As with electric vehicles, NdFeB magnets are a
negligible percentage of total wind turbine costs but are critical to
performance.\160\ Chinese and European firms dominate wind turbine
manufacturing with 23 percent and 58 percent market share,
respectively.\161\ GE Renewable, the only major U.S. manufacturer, had
an estimated market share of just under 12 percent in 2020.\162\
However, offshore wind turbine generators that constitute the largest
source of demand for NdFeB magnets are not currently produced in the
United States.
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\158\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\159\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A
European Call for Action,'' European Raw Materials Alliance,
September 2021, <a href="https://erma.eu/app/uploads/2021/09/01227816.pdf">https://erma.eu/app/uploads/2021/09/01227816.pdf</a>.
\160\ [TEXT REDACTED].
\161\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A
European Call for Action,'' European Raw Materials Alliance,
September 2021, <a href="https://erma.eu/app/uploads/2021/09/01227816.pdf">https://erma.eu/app/uploads/2021/09/01227816.pdf</a>.
\162\ Shashi Barla, ``Global wind turbine market: state of
play,'' Wood Mackenzie, April 14, 2021, <a href="https://www.woodmac.com/news/opinion/global-wind-turbine-market-state-of-play/">https://www.woodmac.com/news/opinion/global-wind-turbine-market-state-of-play/</a>.
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At present, the United States has just seven offshore wind turbines
in two operating projects.\163\ The Block Island Wind Farm off the
coast of Rhode Island comprises five turbines, with a generating
capacity of 30 megawatts, and the Coastal Virginia Offshore Wind pilot
project operates an additional two turbines, with a capacity of 12
megawatts. In contrast, Europe has 25,000 megawatts of offshore wind
capacity installed. To support the President's clean energy objectives,
DoE has established a goal of deploying 30 gigawatts (30,000 megawatts)
of offshore wind power by 2030. To fulfill this goal, in February 2022
the U.S. Government opened bidding for offshore wind leases to
developers for the New York Bight off the Atlantic coast that could
generate up to seven gigawatts of energy and require 600 to 700 wind
turbines. Beyond the national-level goal, eight states--Connecticut,
Maryland, Massachusetts, New Jersey, New York, North Carolina, Rhode
Island, and Virginia--are aiming to procure at least 39,298 megawatts
of offshore wind capacity by 2040.
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\163\ This paragraph uses data from the Department of Energy's
Offshore Wind Market Report 2021. Walter Musial et al., ``Offshore
Wind Market Report: 2021 Edition,'' Department of Energy, August 30,
2021, <a href="https://www.energy.gov/sites/default/files/2021-08/Offshore%20Wind%20Market%20Report%202021%20Edition_Final.pdf">https://www.energy.gov/sites/default/files/2021-08/Offshore%20Wind%20Market%20Report%202021%20Edition_Final.pdf</a>.
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The goal to expand offshore wind capacity is tied to the Biden
Administration's broader efforts to transition to a clean energy
economy. To meet DoE's target of 30 gigawatts of offshore wind power by
2030, the industry is projected to generate over 31,000 construction
period and 13,400 operating period jobs.\164\ This represents a
promising demand stream for emerging domestic NdFeB magnet production
and may encourage further investment in domestic capacity, especially
if wind turbine generators are manufactured in the United States.
Already, one of the leading wind turbine manufacturers, Siemens Gamesa,
announced plans to build a wind turbine blade facility in
Virginia.\165\ Although NdFeB magnets are primarily used in generators,
this indicates some willingness on the part of the wind turbine
industry to establish domestic component manufacturing. Encouraging
additional domestic manufacturing of wind turbine generators would
promote U.S.-based demand for NdFeB magnets and aid in the development
of the U.S. NdFeB magnet industry.
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\164\ Ibid.
\165\ ``Global leadership grows: Siemens Gamesa solidifies
offshore presence in U.S. with Virginia blade facility,'' Siemens
Gamesa, October 25, 2021, <a href="https://www.siemensgamesa.com/newsroom/2021/10/offshore-blade-facility-virginia-usa">https://www.siemensgamesa.com/newsroom/2021/10/offshore-blade-facility-virginia-usa</a>.
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6.4 U.S. Trade in NdFeB Magnets
As noted earlier in this report, the U.S. is highly dependent on
imports for nearly all its direct demand for NdFeB magnets.\166\
However, using direct imports underestimates U.S. import dependence
because NdFeB magnets are often embedded in imported intermediate and
final goods, such as computers and headphones.
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\166\ Unless otherwise noted, all data in this section are from
the U.S. International Trade Commission. See ``USITC Dataweb,'' U.S.
International Trade Commission, last modified October 25, 2021,
<a href="https://dataweb.usitc.gov/trade/search/Import/HTS">https://dataweb.usitc.gov/trade/search/Import/HTS</a>.
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To analyze U.S. reliance on imports of NdFeB magnets, the
Department examined imports of sintered NdFeB magnets (HTS
8505.11.0070) for the years 2016 to 2021 from the United States' top
five import sources (as of 2021) by value, in raw numbers and by share
of imports (see Figure 1).<SUP>167 168</SUP> Figure 2 show the same
series but using quantity (units). China is the predominant source of
imports to the United States, having increased its share of magnet
imports to the United States in quantity from about 70 percent in 2016
to almost 85 percent in 2021 and in value from almost 60 percent in
2016 to about 75 percent in 2021. Germany and Japan are the next
largest source of imports. Japan is particularly important in terms of
magnet value, representing almost nine percent of imports by value
compared to under five percent of imports by quantity. This
substantiates a commonly held view that Japanese magnets tend to be of
higher quality or used in more specialized end products than their
Chinese counterparts.\169\ These data may underestimate the
contribution of Japanese firms, given that exports from the Philippines
and Malaysia likely reflect Japanese production facilities in these
locations.\170\ The share of German magnet imports to the United States
has fallen substantially from about 14 percent in 2016 to under two
percent in 2021 in terms of quantity and almost 11 percent in 2016 to
under four percent in 2021 in terms of value.
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\167\ Bonded NdFeB magnets do not have their own HTS code and
instead fall into HTS 8505.11.0090 (``Permanent magnets and articles
intended to become permanent magnets after magnetization: Of metal:
Other''). Bonded NdFeB magnets comprise about seven percent of the
global market, are of lower grade, and are substitutable with other
magnets. Meeting between the Critical Materials Institute and the
Department of Commerce, (Virtual Meeting October 6, 2021); ``Rare
Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department
of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\168\ The Department also examined imports of neodymium metal
(HTS 2805.30.0020). Neodymium and praseodymium metal are the only
NdFeB magnet components that have their own HTS codes. Imports of
neodymium metal are minimal (about $371,000 in 2021) and come almost
entirely from China (about 94 percent in 2021) with the remainder
imported from the United Kingdom. ``USITC Dataweb,'' U.S.
International Trade Commission, last modified October 25, 2021,
<a href="https://dataweb.usitc.gov/trade/search/Import/HTS">https://dataweb.usitc.gov/trade/search/Import/HTS</a>.
\169\ Damien Ma and Joshua Henderson, ``The Impermanence of
Permanent Magnets: A Case Study on Industry, Chinese Production, and
Supply Constraints,'' Paulson Institute, November 16, 2021. <a href="https://macropolo.org/analysis/permanent-magnets-case-study-industry-chinese-production-supply/">https://macropolo.org/analysis/permanent-magnets-case-study-industry-chinese-production-supply/</a>.
\170\ ``Annual Report 2021'', Shin-Etsu Chemical Co., Ltd.,
2021, <a href="https://www.shinetsu.co.jp/wp-content/uploads/2021/07/Annual-Report-2021-for-viewing.pdf">https://www.shinetsu.co.jp/wp-content/uploads/2021/07/Annual-Report-2021-for-viewing.pdf</a>.
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The Department also examined U.S. exports of sintered NdFeB magnets
in total and to the top five destinations (as of 2021) for the same
2016 to 2021 period (see Figure 3).\171\ Domestic exports of sintered
NdFeB magnets ranged from a little over $7 million in 2016 to about $12
million in 2021. Mexico was the top destination for U.S. exports in
2021, although it still only accounted for about 30 percent of domestic
sintered NdFeB magnet exports. Germany, the second most popular
destination, accounted for less than nine percent of domestic sintered
NdFeB magnet exports. U.S. magnet export destinations have also seen
considerable turnover. In 2016, Singapore and Malaysia were the top
destinations for U.S. sintered NdFeB magnet exports, accounting for
about 28 percent of domestic exports ($2 million) and 15 percent of
domestic exports ($1.1 million), respectively. By 2021, they were
seventh at four percent ($488,000) and sixteenth at less than two
percent ($185,000), respectively. Using 2021 figures, the United States
imported more than 20 times the value of its domestic NdFeB magnet
exports. Although there is only one active domestic producer of
sintered NdFeB magnets, the United States does have an active ecosystem
of magnet finishers and fabricators. These firms' activities almost
certainly drive the modest value of U.S. NdFeB magnet domestic exports.
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\171\ These data reflect domestic exports rather than total
exports. Domestic exports measure goods that are grown, produced, or
manufactured in the United States or which may have been changed,
enhanced in value, or improved in condition in the United States. It
therefore excludes unimproved reexports. See ``USITC Dataweb,'' U.S.
International Trade Commission, last modified October 25, 2021,
<a href="https://dataweb.usitc.gov/trade/search/Export/HTS">https://dataweb.usitc.gov/trade/search/Export/HTS</a>.
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6.5 Duties on NdFeB Magnet Imports
NdFeB magnets and constituent products, including rare earth
elements, rare earth carbonates, rare earth oxides, metals, and alloys,
are subject to general tariff rates and the special tariff rate (see
Table 5). The core product in this investigation, sintered NdFeB
magnets (HTS 8505.11.0070) are subject to a general rate of 2.1 percent
or a preferential rate of zero percent.\172\ The overall effect of
these duties on end-users is small, although not nonexistent. Some
NdFeB magnet distributors/finishers/consumers note reducing tariffs on
sintered NdFeB magnets would reduce their input costs, [TEXT
REDACTED].\173\
---------------------------------------------------------------------------
\172\ The general rate for all 10-digit HTS codes under HTS
8505.11.00 (``Permanent magnets and articles intended to become
permanent magnets after magnetization: Of metal'') is the same at
2.1 percent. Bonded NdFeB magnets, which fall under 8505.11.0090
(``Permanent magnets and articles intended to become permanent
magnets after magnetization: Of metal: Other''), are therefore
subject to the same rates as their sintered counterparts. The
preferential tariff rate applies to qualifying imports under U.S.
free trade agreements and other preference programs.
\173\ U.S. Department of Commerce, Bureau of Industry and
Security, NdFeB Survey.
\174\ These figures reflect the stated third country duty.
Autonomous tariff suspension rates may be lower--zero percent in the
case of 8505.11.0070, sintered NdFeB magnets.
Table 5--Tariff Rates for NdFeB Magnets and Magnet Components
--------------------------------------------------------------------------------------------------------------------------------------------------------
General
HTS code Product description rate Preferential rate Japan general rate EU general rate \174\
(percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
8505.11.0070........... Sintered NdFeB magnets 2.1 Free....................... Free...................... 2.2 percent.
8505.11.0090........... Other permanent 2.1 Free....................... Free...................... 2.2 percent.
magnets and articles
intended to become
permanent magnets
after magnetization
of metal.
2805.30.0020........... Neodymium metal....... 5 Free....................... Free...................... 2.7 to 5.5 percent.\175\
2805.30.0015........... Praseodymium metal.... 5 Free....................... Free...................... 2.7 to 5.5 percent.
2805.30.0050........... Other rare earth 5 Free....................... Free...................... 2.7 to 5.5 percent.
metals, not
intermixed or
interalloyed.
2805.30.0090........... Other rare earth 5 Free....................... Free...................... 2.7 to 5.5 percent.
metals, intermixed or
interalloyed.
2846.90.20............. Mixtures of rare earth Free Free....................... Free...................... Free to 3.2 percent.\176\
oxides or rare earth
chlorides.
2846.90.80............. Mixtures of rare earth 3.7 Free....................... Free...................... Free to 3.2 percent.
carbonates other than
cerium carbonate.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: ``HTS Search,'' U.S. International Trade Commission, last accessed April 19, 2022, <a href="https://hts.usitc.gov/">https://hts.usitc.gov/</a>; ``Access2Markets,'' European
Commission, last accessed April 19, 2022, <a href="https://trade.ec.europa.eu/access-to-markets/en/home">https://trade.ec.europa.eu/access-to-markets/en/home</a>; ``Japan's Tariff Schedule as of April 1 2022,'' Japan
Customs, last accessed April 19, 2022, <a href="https://www.customs.go.jp/english/tariff/2022_04_01/index.htm">https://www.customs.go.jp/english/tariff/2022_04_01/index.htm</a>.
The hundreds of products containing embedded NdFeB magnets, such as
electric motors, MRI machines, and consumer electronics like headphones
and printers are also tracked by HTS code. Some end-use categories,
including electric motors and MRI machines, are not subject to general
tariff rates, while others, such as generators for wind turbines, are
subject to tariffs--2.5 percent in the case of generators.\177\ As
discussed earlier, the NdFeB magnet contained within final goods is
generally a small percentage of the overall cost of the product.
---------------------------------------------------------------------------
\175\ Exact concordance for HTS 2805 not available.
\176\ Exact concordance for HTS 2846.90 not available. The
relevant products for NdFeB magnets face third country duties of 3.2
percent (neodymium and praseodymium compounds, as well as compounds
of mixtures of metals) or zero percent (terbium and dysprosium
compounds).
\177\ ``HTS Search,'' U.S. International Trade Commission, last
accessed April 19, 2022, <a href="https://hts.usitc.gov/">https://hts.usitc.gov/</a>.
---------------------------------------------------------------------------
[[Page 9449]]
7. Global NdFeB Magnet Industry
7.1 Global Demand
Total global demand for NdFeB magnets was estimated at about
119,000 tons in 2020, of which sintered magnets account for over 93
percent of total demand and bonded magnets the remaining seven
percent.<SUP>178 179</SUP> As of 2020, consumer electronics and
industrial motors are the primary consumers of NdFeB magnets, with
about 30 percent of the market each. Offshore wind turbines account for
another 14 percent of total NdFeB magnet demand, with smaller shares
for electric vehicles, motors for other types of vehicles, and other
applications (see Table 6). The magnet content in these products varies
but in general accounts for a small portion of the material costs of
production. Wind turbines and MRI machines use large amounts of magnets
but are produced and consumed in relatively small numbers, while
consumer electronic devices contain very small amounts of magnets but
are produced in the millions of units. The automotive sector lies
somewhere in between, with each electric vehicle drive train consuming
between one and two kg of NdFeB magnets.\180\ Regardless of the weight
of the magnet, the strong magnetic properties provided by NdFeB magnets
are key to effective and efficient product performance.
---------------------------------------------------------------------------
\178\ Except where otherwise noted this section draws on the
DoE's ``Rare Earth Permanent Magnets'' report. See ``Rare Earth
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of
Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\179\ As noted earlier, valid and reliable estimates of demand
are difficult to generate because of the opacity of the global NdFeB
magnet supply chain and these estimates of global demand, both in
aggregate and by end-use application, should be approached with
caution.
\180\ ``Critical Materials Strategy,'' Department of Energy,
December 2011, <a href="https://www.energy.gov/sites/default/files/DOE_CMS2011_FINAL_Full.pdf">https://www.energy.gov/sites/default/files/DOE_CMS2011_FINAL_Full.pdf</a>.
Table 6--Expected Magnets Contained in Total Global Demand for Selected NdFeB Magnet Applications, Thousands of
Tons *
----------------------------------------------------------------------------------------------------------------
Total demand in 2020 Total projected Total projected
---------------------- demand in 2030 (high demand in 2050 (high
growth) growth)
Application Amount -------------------------------------------
(kt) Share (%) Amount Amount
(kt) Share (%) (kt) Share (%)
----------------------------------------------------------------------------------------------------------------
Offshore wind turbines........................ 16.9 14.2 139.2 36.0 273.7 36.3
Electric vehicles............................. 7.3 6.1 114.1 29.5 266 35.3
Consumer electronics (hard disk drives, cell 35.1 29.4 41 10.6 65.4 8.7
phones, loudspeakers, other).................
Industrial motors............................. 36.0 30.2 53.7 13.9 85.7 11.4
Non-drivetrain motors in vehicles............. 9.4 7.9 18.3 4.7 29.3 3.9
Other sintered magnets (Power tools, electric 6.5 5.5 9.6 2.5 15.3 2.0
bikes).......................................
Bonded magnets................................ 8.0 6.7 11.1 2.9 17.7 2.3
-----------------------------------------------------------------
Total..................................... 119.2 100.0 387 100.0 753.2 100.0
----------------------------------------------------------------------------------------------------------------
* The figures presented represent total--or the sum of direct and embedded--demand.
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24,
2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
Total global demand for NdFeB magnets is expected to grow
dramatically over the next decade, increasing from 119,000 tons in 2020
to 387,000 tons by 2030 and over 750,000 tons by 2050 in a net zero
carbon emission scenario. This equates to an average annual growth rate
of 12.5 percent through 2030 and 6.3 percent through 2050. Electric
vehicles and offshore wind turbines will drive this growth and are
projected to account for almost 30 percent and about 36 percent of
NdFeB magnet demand, respectively, by 2030 as a result of the world's
evolving clean energy goals. The push for energy efficiency in other
sectors, including traditional NdFeB magnet applications such as
consumer electronics and industrial motors, will also contribute to
increased demand for NdFeB magnets. However, growth in these areas is
expected to be more modest, with their share of total demand shrinking
from almost 60 percent of total demand in 2020 to less than 25 percent
of total demand in 2030.
The rapid growth in demand for NdFeB magnets is expected to strain
the current global value chain. One market research firm forecasts that
combined neodymium, praseodymium, and neodymium-praseodymium oxide
shortages will rise to 21,000 tons by 2030 and 68,000 tons by 2035,
while NdFeB alloy and powder shortages will reach 66,000 tons by 2030
and 206,000 tons by 2035.\181\ For reference, the Department's survey
of the U.S. NdFeB magnet industry indicates that by 2026 the U.S. may
produce a little under [TEXT REDACTED] of rare earth oxides and about
[TEXT REDACTED] of NdFeB alloys.
---------------------------------------------------------------------------
\181\ ``Adamas Intelligence forecasts global demand for NdFeB
magnets to increase at CAGR of 8.6% through 2035; shortages of
alloys, powders, REE expected,'' Green Car Congress, April 20, 2022,
<a href="https://www.greencarcongress.com/2022/04/20220420-adamas.html">https://www.greencarcongress.com/2022/04/20220420-adamas.html</a>.
---------------------------------------------------------------------------
7.2 Global NdFeB Magnet Value Chain
The Department synthesized primary and secondary data on the global
NdFeB magnet value chain's market conditions (see Appendix E, ``Global
NdFeB Magnet Production: A Firm-Level Perspective''). The Department
focused on five important current and potential industry producers
outside of the United States: Australia, Canada, China, the European
Union, and Japan. For each country or region, participation in the main
market segments (mining, processing of carbonates/separation of oxides,
metallization/alloying, magnet production) plus recycling and
substitution is described. The major firms involved in production,
often multinationals with global operations, are also discussed.
Table 7 provides a review of market share by country for the
consolidated market segments of mining, separation, metallization, and
alloying/magnet manufacture. As noted earlier, China has the largest
share of global production, by a large margin, at every step of the
NdFeB magnet value chain.
[[Page 9450]]
[TEXT REDACTED].\182\ Australia is the third largest miner after China
and the United States, and the Australian firm Lynas Rare Earths is
responsible for Malaysia's seven percent share of the refined oxide
market. Japan is the second largest alloy and magnet producer (seven
percent in 2020), and its firms produce metals, alloys, and magnets in
Japan, Southeast Asia, and China. [TEXT REDACTED].\183\ The European
Union has plans for significant growth in rare earth mining and magnet
production, and seeks to grow its relatively small share of the oxide
separation, alloying, and magnet production markets. [TEXT
REDACTED].\184\ Finally, Canada also plans to establish rare earth
mining and separation capacity, in addition to Canadian firms such as
Neo Performance Materials who maintain global capacity in multiple
steps of the magnet value chain.
---------------------------------------------------------------------------
\182\ Adamas Intelligence, ``Rare Earth Magnet Market Outlook to
2030,'' 2020.
\183\ Ibid.
\184\ Ibid.
Table 7--Market Share by Country, 2021 for Mining and 2020 for Other Steps
----------------------------------------------------------------------------------------------------------------
Metal Magnet alloy
Country Mining Separation \186\ refining \187\ manufacturing \188\
\185\ (%) (%) (%) (%)
----------------------------------------------------------------------------------------------------------------
China....................................... 60 89 90 92
U.S......................................... 15 ................ .............. <1
Myanmar (Burma)............................. 9 ................ .............. ...................
Australia................................... 8 ................ .............. ...................
Madagascar.................................. 1 ................ .............. ...................
India....................................... 1 1 .............. ...................
Russia...................................... 1 ................ .............. ...................
Thailand.................................... 3 ................ ~3 (\189\)
Malaysia.................................... ........... 7 .............. ...................
Estonia..................................... ........... 1 ~2 ...................
Japan....................................... ........... ................ .............. 7
Vietnam..................................... >1 ................ ~3 1
Laos........................................ ........... ................ ~2 ...................
Germany..................................... ........... ................ .............. <1
Slovenia.................................... ........... ................ .............. <1
Finland..................................... ........... ................ .............. <1
U.K......................................... ........... ................ <1 ...................
Other countries............................. 1 2 <1 <1
----------------------------------------------------------------------------------------------------------------
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24,
2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>; Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries 2022,'' U.S. Geological Survey, 2022,
<a href="https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf">https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf</a>.
7.3 Russia and the NdFeB Magnet Industry
---------------------------------------------------------------------------
\185\ For 2021 estimates of rare earth mine output by country,
see Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries
2022,'' U.S. Geological Survey, 2022, <a href="https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf">https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf</a>.
\186\ Calculated based on current understanding of where
concentrate from specific producers is separated (for example,
output from Lynas' Mount Weld Mine in Australia is separated at its
LAMP facility in Malaysia and HREs mined in Myanmar are transported
to China for further processing). ``Rare Earth Permanent Magnets:
Supply Chain Deep Dive Report,'' Department of Energy, February 24,
2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\187\ Current hypothesis based on expert consultation. ``Rare
Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department
of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\188\ ``Rare earth magnet market outlook to 2030,'' Adamas
Intelligence, August 2020.
\189\ In 2019, Thailand accounted for about eight percent of
bonded NdFeB powders. Neo Magnequench (a subsidiary of Neo
Performance Materials) manufactures bonded magnetic powders at its
facility in Korat, Thailand. ``Rare Earth Permanent Magnets: Supply
Chain Deep Dive Report,'' Department of Energy, February 24, 2022,
<a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
---------------------------------------------------------------------------
Russia is not a major direct participant in the NdFeB magnet value
chain. In 2021 Russian production of rare earth elements was estimated
at 2,700 tons, equal to about one percent of the global market.\190\
However, Russia has significant reserves of rare earths, estimated at
21 million tons or about 17.5 percent of the global total.\191\
Canadian firm Neo Performance Materials states it uses Russian
feedstocks in its Estonian separation facility, along with feedstocks
from Australia, China, and the United States.\192\ Russia does not
participate in any downstream segments of the value chain.\193\ In
addition, the United States imports 1001 steel from Germany and
sometimes Brazil, and ferroboron is produced in China, India, and
Turkey.\194\ Finally, based on market research and industry meetings,
Russia does not appear to be a source of critical equipment for NdFeB
magnet production.
---------------------------------------------------------------------------
\190\ Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries
2022,'' U.S. Geological Survey, 2022, <a href="https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf">https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf</a>.
\191\ Ibid.
\192\ ``Neo Performance Materials MD&A,'' Neo Performance
Materials, 2021, <a href="https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf">https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf</a>.
\193\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive
Report,'' Department of Energy, February 24, 2022, <a href="https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf">https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf</a>.
\194\ Ibid.
---------------------------------------------------------------------------
[TEXT REDACTED]
One method to evaluate the exposure of the NdFeB magnet industry to
Russia is to examine the effects of Russia's invasion of Ukraine on
investor expectations using an event study.\195\ If investors think
that the NdFeB magnet industry will be negatively affected by Russia's
invasion of Ukraine, an abnormal negative market return for
[[Page 9451]]
publicly traded firms in the NdFeB magnet industry should be observed
around that event. The Department therefore estimated the abnormal
market return around the time of Russia's invasion of Ukraine for four
NdFeB magnet industry firms: MP Materials, a rare earths miner who
plans to create a vertically integrated mine to magnet firm in the
United States; Energy Fuels, a U.S. rare earths processor who is
considering separating oxides; Neo Performance Materials, a Canadian
firm that produces rare earth oxides in Estonia, metals and alloys in
Thailand and China, and NdFeB magnets in China; and Lynas Rare Earths,
an Australian rare earths miner that produces oxides in Malaysia. Other
public companies involved in the NdFeB magnet value chain were excluded
because they are conglomerates with significant non-NdFeB magnet
operations (e.g., Shin-Etsu, TDK, Hitachi), tangentially involved in
the NdFeB magnet industry (e.g., Chemours), or at a more nascent stage
of production (e.g., IperionX, Peak Rare Earths). The Department
downloaded stock price data for each of these firms and the S&P 500
index from January 1, 2021, through February 24, 2022, from Yahoo
Finance. The Department then calculated the daily return of each firm
and the S&P 500 index. In line with a simple market model event study,
the Department estimated each firm's abnormal return in two steps. For
each firm, the Department first regressed the firm's daily return on
the S&P 500 index's daily return in a trading window of 250 days to 30
days prior to Russia's invasion of Ukraine (February 24, 2022). The
Department then used the estimated coefficients from this regression
and the S&P 500 index's daily return to predict the firm's return in a
trading window one day prior to one day after the invasion. Finally,
the Department subtracted the firm's predicted daily return from the
firm's observed daily return to generate an estimate of the firm's
abnormal return in a trading window one day prior to one day after the
invasion.
---------------------------------------------------------------------------
\195\ For an overview of event studies, see e.g., John Binder,
``The Event Study Methodology Since 1969,'' Review of Quantitative
Finance and Accounting 11: 111-137, 1998, <a href="https://link.springer.com/article/10.1023/A:1008295500105">https://link.springer.com/article/10.1023/A:1008295500105</a>; S.P. Kothari and Jerold B. Warner,
``Chapter 1--Econometrics of Event Studies,'' Handbook of Empirical
Corporate Finance, Volume 1, 2007, <a href="https://doi.org/10.1016/B978-0-444-53265-7.50015-9">https://doi.org/10.1016/B978-0-444-53265-7.50015-9</a>; Abigail McWilliams and Donald Siegel, ``Event
Studies in Management Research: Theoretical and Empirical Issues,''
Academy of Management Journal 40 (3): 626-657, 1997, <a href="https://doi.org/10.5465/257056">https://doi.org/10.5465/257056</a>.
---------------------------------------------------------------------------
This event study analysis supports market research that suggests
the NdFeB magnet industry is not highly exposed to Russia.\196\ Using a
one sample t-test, the average abnormal return is positive at p<.05
with a sample mean of 0.026 and a 95 percent confidence interval of
0.001 to 0.051.\197\ A positive abnormal return indicates that firms'
stock prices increased more than they would have in the absence of an
invasion, suggesting that investors did not expect the invasion to
negatively affect the NdFeB magnet industry. Not only is the sign of
the abnormal return different than what would be expected if investors
believed the invasion would negatively affect the NdFeB magnet
industry, but it is statistically significant. This analysis provides
additional evidence corroborating the NdFeB magnet industry's lack of
exposure to Russia.
---------------------------------------------------------------------------
\196\ The Department strongly cautions against overinterpreting
the results of this analysis because Russia's invasion was not
wholly unanticipated and investors should therefore have partially
priced in the costs of conflict, and the sample size is very small.
Nevertheless, this analysis provides suggestive evidence of the
NdFeB magnet industry's minimal exposure to Russia.
\197\ Using a two-day trading window--the day of the event and
the day after--results in an average abnormal return of 0.018, not
significant at p<.05.
---------------------------------------------------------------------------
To assess whether one firm was driving this result, the Department
iteratively dropped each observation, resulting in a sample mean of
.018 without Energy Fuels (not significant at p<.05), 0.025 without
Lynas Rare Earths (not significant at p<.05), 0.024 without MP
Materials (not significant at p<.05), and 0.037 without Neo Performance
Materials (significant at p<.05). Neo Performance Materials' stock
price did not experience as positive an abnormal return as the other
three firms', suggesting that investors were relatively less optimistic
about the effects of the invasion on Neo Performance Materials. This is
consonant with market research expectations, because Neo Performance
Materials sources some rare earths from Russia (along with Australia,
China, and the United States) and therefore has more direct exposure to
Russia than the other three firms.\198\
---------------------------------------------------------------------------
\198\ ``Neo Performance Materials MD&A,'' Neo Performance
Materials, 2021, <a href="https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf">https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf</a>.
---------------------------------------------------------------------------
8. Status and Forecast of the U.S. NdFeB Magnet Industry
8.1 U.S. Production of NdFeB Magnets and Components, 2017 to 2026
This section covers U.S. production of NdFeB magnets and magnet
components, including mixed rare earth oxides, rare earth carbonates,
individual rare earth oxides, rare earth metals, and rare earth alloys,
from 2017 to 2026.\199\ It focuses on identifying current and planned
producers, their participation in the NdFeB magnet value chain, and the
current and anticipated quantity of U.S. production at each value chain
step. Later sections will elucidate the challenges the industry faces
in meeting its production forecasts.
---------------------------------------------------------------------------
\199\ [TEXT REDACTED]
---------------------------------------------------------------------------
8.1.1 Firm Participation in the U.S. NdFeB Magnet Value Chain
Except for rare earths mining, the United States was not a major
participant in the NdFeB magnet value chain from 2017 to 2021 and only
seven firms participated in any step of the NdFeB magnet value chain
over this period (see Figure 4). [TEXT REDACTED].
The Department forecasts U.S. industry growth starting in 2022, due
to a combination of expected demand growth, U.S. Government and private
sector interest in supply chain resiliency, and rising rare earths
prices. Between 2022 and 2026, ten additional firms indicate they will
enter the market while the seven original firms noted in the 2017 to
2021 period plan to continue, and in some cases expand, their
operations. A total of 17 firms are expected to participate in the
NdFeB magnet value chain by 2026 (see Figure 5). [TEXT REDACTED]
[TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
[TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT
REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED]
----------------------------------------------------------------------------------------------------------------
[TEXT ........... ........... ........... ........... ........... .......... [TEXT ..........
REDACTED] REDACTED]
[TEXT [TEXT ........... ........... ........... ........... .......... .......... ..........
REDACTED] REDACTED]
[TEXT ........... ........... ........... ........... ........... .......... [TEXT ..........
REDACTED] REDACTED]
[TEXT ........... [TEXT ........... ........... ........... .......... [TEXT ..........
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[TEXT [TEXT ........... ........... ........... ........... .......... .......... ..........
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[[Page 9452]]
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REDACTED] REDACTED]
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[TEXT REDACTED]
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[TEXT ........... ........... [TEXT ........... ........... .......... .......... [TEXT
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[TEXT ........... ........... [TEXT ........... ........... .......... .......... ..........
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[TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT .......... [TEXT
REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED]
[TEXT [TEXT [TEXT ........... ........... ........... .......... .......... ..........
REDACTED] REDACTED] REDACTED]
[TEXT ........... ........... ........... ........... [TEXT [TEXT .......... [TEXT
REDACTED] REDACTED] REDACTED] REDACTED]
[TEXT ........... ........... [TEXT [TEXT [TEXT .......... .......... [TEXT
REDACTED] REDACTED] REDACTED] REDACTED] REDACTED]
[TEXT ........... ........... ........... ........... ........... [TEXT .......... ..........
REDACTED] REDACTED]
[TEXT ........... ........... [TEXT ........... ........... .......... .......... [TEXT
REDACTED] REDACTED] REDACTED]
[TEXT ........... ........... ........... ........... ........... .......... [TEXT ..........
REDACTED] REDACTED]
[TEXT ........... ........... [TEXT ........... ........... .......... .......... ..........
REDACTED] REDACTED]
[TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT .......... ..........
REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED] REDACTED]
[TEXT ........... ........... ........... ........... [TEXT [TEXT .......... ..........
REDACTED] REDACTED] REDACTED]
[TEXT [TEXT ........... ........... ........... ........... .......... .......... ..........
REDACTED] REDACTED]
----------------------------------------------------------------------------------------------------------------
[TEXT REDACTED]
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8.1.2 Production of NdF
[…truncated; see source link]Indexed from Federal Register on February 14, 2023.
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