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

Federal RegisterFeb 14, 2023

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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.

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

https://bis.doc.gov/232.

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:

http://www.bis.doc.gov/232.

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.

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.

”

2 3

NdFeB magnets are also called NdFeB permanent magnets, neodymium-iron-boron (permanent) magnets, or neodymium (permanent) magnets. This report uses the term NdFeB magnets.

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.

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,

https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf

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:

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.”

19 U.S.C. 1862(b)(3)(A).

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.

5 6

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

References to NdFeB magnets indicate sintered NdFeB magnets, except where otherwise specified.

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.

Although NdFeB magnets' value tends to be small relative to the cost of the end-product, they are nonetheless key to product performance.

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,

https://www.cisa.gov/critical-infrastructure-sectors

NdFeB magnets are composed of about 69 percent iron, 30 percent rare earths, and one percent boron by weight.

NdFeB magnets contain a mix of rare earth elements, primarily neodymium, praseodymium, dysprosium, and terbium, depending on the end use.

NdFeB magnets' iron-boron component is made up of American Iron and Steel Institute 1001 steel and ferroboron.

10 11

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.

The rare earth element component constitutes the largest portion of NdFeB magnet cost.

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf

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,

https://global.toyota/en/newsroom/corporate/21139684.html

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.,

https://www.theprocesspiping.com/introduction-sae-aisi-steel-numbering-system/

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf

Ibid.

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.

13 14

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.

Rare earth carbonates are also referred to as mixed intermediates, although the term mixed intermediates can cover rare earth chlorides.

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.

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.

15 16 17

There is

currently only one firm in the United States, Noveon (formerly Urban Mining Company), that produces sintered NdFeB magnets, albeit in small quantities.

18 19 20

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.

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.

The Department's calculations using USITC data. “USITC Dataweb,” U.S. International Trade Commission, last modified October 25, 2021,

https://dataweb.usitc.gov/trade/search/Import/HTS

Imports from the Philippines reflect activity by Japanese firms.

See

Appendix E, “Global NdFeB Magnet Production: A Firm-Level Perspective,” for more information.

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).

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).

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,

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

China dominates all steps of the global NdFeB magnet value chain.

In 2020, China controlled about 92 percent of the global NdFeB magnet and magnet alloy market.

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.

23 24 25

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.

26 27

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.

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.

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf

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,

https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf

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.”

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf

“Hyperion Testwork Confirms High Value Heavy Rare Earths,” Mining Stock Education, August 9, 2021,

https://www.miningstockeducation.com/2021/08/hyperion-testwork-confirms-high-value-heavy-rare-earths/

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).

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,

https://www.reuters.com/article/molycorp-bankruptcy-idUSL2N1621G0

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).

29 30

Japanese and European firms are almost completely reliant on imported feedstocks to produce metals, alloys, and ultimately NdFeB magnets.

“About Magnet e Motion,” Magnet e Motion, n.d.,

https://magnetemotion.com/about-magnet-e-motion.html

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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).

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).

Malaysia comprises seven percent of the 2020 market for rare earth oxide separation, due entirely to the Australian firm Lynas Rare Earths.

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.

Daniel Cordier, “Rare Earths: Mineral Commodity Summaries 2022,” U.S. Geological Survey, 2022,

https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

Ibid.

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.

35 36

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.

“China resumes rare earth exports to Japan,” BBC, November 24, 2010,

https://www.bbc.com/news/business-11826870

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,

https://sgp.fas.org/crs/row/R42510.pdf

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

plan to establish U.S. NdFeB magnet manufacturing facilities by 2026.

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.

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,

https://mpmaterials.com/articles/mp-materials-to-build-us-magnet-factory-enters-long-term-supply-agreement-with-general-motors/

; On Quadrant Magnetics,

see

“Quadrant's NeoGrass to Become New Magnet Plant in US,” Magnetics Business and Technology, April 5, 2022,

https://magneticsmag.com/quadrants-neograss-to-become-new-magnet-plant-in-us/

; On USA Rare Earth,

see

Trish Saywell, “USA Rare Earth outlines mine-to-magnet strategy,” Mining.com, January 8, 2021,

https://www.mining.com/usa-rare-earth-outlines-mine-to-magnet-strategy/

; 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,

https://investor.gm.com/news-releases/news-release-details/general-motors-and-vacuumschmelze-vac-announce-plans-build-new

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.

In particular, NdFeB magnets are the technology of choice for electric vehicles and offshore wind turbines.

See

“Executive Order on Tackling the Climate Crisis at Home and Abroad,” The White House, January 27, 2021,

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/

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

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.

See

19 U.S.C. 1862(d).

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.”

See

19 U.S.C. 1862(b)(2)(A)(i)-(iii).

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., § 705.9.

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.”

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.”

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.

44 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”), at 5,

https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file

Ibid.

Presidential Policy Directive 21, “Critical Infrastructure Security and Resilience,” February 12, 2013 (“PPD-21”).

“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”),

https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file

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.

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”

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.

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.

Congress broke

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.”

See

19 U.S.C. 1862(d).

19 U.S.C. 1862(b)(3)(A).

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 . . . ”).

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.”).

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”).

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).

“Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews Under Executive Order 14017,” The White House, June 2021,

https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf

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).

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:

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,

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) 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;

(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

(BIS-2021-0035) under which all public comments can be viewed in full on

Regulations.gov.

See

also “86 FR 53277 NdFeB Permanent Magnets 232 investigation_published 9-27-21_comments due 11-12-21,”

Regulations.gov

, September 27, 2021,

https://www.regulations.gov/document/BIS-2021-0035-0001

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

Firm name

Parent location

Current market segment

participation

Description of current and planned market segment 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 Processing

Current producer of mixed 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 Mining; Rare Earth Oxide Separation

Current rare earth element miner and producer of 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 Mining

Current producer of rare earth elements. Planned producer of rare earth oxides, rare earth metals, rare earth alloys, and NdFeB magnets.

National Electrical Manufacturers Association

United States

NdFeB Magnet Consumer

An industry 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 Separation; Metal Refining; Rare Earth Alloy Production; NdFeB Magnet Production

Current producer of rare earth oxides, rare earth metals, rare earth alloys, and NdFeB magnets. Production is entirely 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.

Shin-Etsu

Japan

Metal Refining; Rare Earth Alloy Production; NdFeB Magnet Production

Current producer of rare earth metals, rare earth alloys, and NdFeB magnets. Production is entirely outside of the United States.

Turntide Technologies

United States

NdFeB Magnet Substitute Production

Current producer of a NdFeB magnet-free motor.

Noveon

United States

NdFeB Magnet Production; NdFeB Magnet Recycling

Current recycler and remanufacturer of NdFeB 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 Production

Current producer of NdFeB 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.

54 55

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”).

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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.

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.

Cerium is sometimes used in NdFeB magnets but is an overproduced rare earth element and as such does not pose a supply chain vulnerability.

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

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).

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.

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”).

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.

Ibid.

See

“Critical Infrastructure Sectors,” Cybersecurity and Infrastructure Security Agency, October 21, 2020,

https://www.cisa.gov/critical-infrastructure-sectors

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

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.

By weight, NdFeB magnets are typically composed of about 30 percent rare earth elements, 69 percent

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.

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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.

Outside of the United States, ion adsorption clays, sometimes called ionic clays, are also a source of rare earths, especially heavy rare earths.

63 64

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.

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.

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.

Heavy mineral sands are mainly mined for titanium and zircon.

See

“Heavy Mineral Sand,” Science Direct, n.d.,

https://www.sciencedirect.com/topics/engineering/heavy-mineral-sand.

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,

https://www.usgs.gov/centers/geology%2C-energy-%26amp%3Bamp%3B-minerals-science-center/science/rare-earth-element-accumulation#overview.

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,

https://doi.org/10.1016/j.resourpol.2016.03.003.

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.

“2021 Annual Report,” Lynas Rare Earths, Ltd., 2021,

https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf.

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.

[TEXT REDACTED].

Rare earths can also be extracted from end-of-life products.

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).

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.

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.

Thomas Lograsso, Critical Materials Institute, written communication, May 8, 2022.

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.

Bonded NdFeB magnets can also be made from strip cast material after hydrogen decrepitation.

The rapidly solidified powder feedstock is then mixed with a binder to form a final shape using compression bonding, injection molding, or calendaring.

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

produce a rigid magnet.

Injection molding entails blending powder with a thermoplastic compound and injecting it into a mold cavity to form a rigid or flexible magnet.

Calendaring uses a roll press to form flexible magnet sheets.

Rigid magnets require binders such as nylon, Teflon, vinyl, and thermoset epoxy, while flexible magnets rely on binders like nitrile rubber and vinyl.

John J. Croat, “4—Production of rapidly solidified NdFeB magnetic powder,” Rapidly Solidified Neodymium-Iron-Boron Permanent Magnets, 2018,

https://doi.org/10.1016/B978-0-08-102225-2.00004-1

; B.M Ma et al., “Recent development in bonded NdFeB magnets,” Journal of Magnetism and Magnetic Materials 239 (1-3): 418-423, February 2002,

https://doi.org/10.1016/S0304-8853(01)00609-6.

John J. Croat, “Chapter 6—Compression bonded NdFeB permanent magnets,” Modern Permanent Magnets, 2022,

https://doi.org/10.1016/B978-0-323-88658-1.00007-8.

Steve Constantinides and John de Leon, “Permanent Magnet Materials and Current Challenges, Arnold Magnetic Technologies, n.d.,

http://www.arnoldmagnetics.com/wp-content/uploads/2017/10/Permanent-Magnet-Materials-and-Current-Challenges-Constantinides-and-DeLeon-PowderMet-2011-ppr.pdf

; Jun Cui et al., “Manufacturing Processes for Permanent Magnets: Part II—Bonding and Emerging Methods,” JOM 74: 2492-2506, June 2022,

https://doi.org/10.1007/s11837-022-05188-1.

Ibid.

John Ormerod, “Bonded Magnets: A Versatile Class of Permanent Magnets,” Magnetics Business and Technology, 2015,

https://bunting-dubois.com/wp-content/uploads/2021/04/Magnetics-Business-Technology-Summer-2015-8-9.pdf.

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.

Additionally, the process of concentrating rare earth bearing ore is tailored to specific ore deposits.

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.

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.

Individual rare earth oxides are turned into metal using electrowinning and calcium reduction.

82 83

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.

On sources of rare earth elements,

see

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

Sebastiaan Peelman et al., “Leaching of Rare Earth Elements: Past and Present,” ERES2014: 1st European Rare Earth Resources Conference, September 4 to 7, 2014,

http://www.eurare.org/docs/eres2014/seventhSession/SebastiaanPeelman.pdf

; 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,

https://doi.org/10.1016/B978-0-12-802328-0.00021-8.

Laura Talens Peiro and Gara Villalba Mendez, “Material and Energy Requirement for Rare Earth Production,” JOM 65: 1327-1340, 2013,

https://doi.org/10.1007/s11837-013-0719-8.

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

Thomas Lograsso, Critical Materials Institute, written communication, May 8, 2022.

Danielle Miousse, “A New Spin on Electrowinning,” PF Products Finishing, May 1, 2007,

https://www.pfonline.com/articles/a-new-spin-on-electrowinning.

There is more information on material losses from alloying to magnet production.

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.

Indeed, some industry participants question the viability of magnet manufacturing that does not recycle swarf.

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.

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

Meeting between Lynas Rare Earths and the Department of Commerce, (Virtual Meeting, March 30, 2022).

Ibid.

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.

In the 1950s, research by the Ames Laboratory advanced rare earths processing technology.

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.

Meanwhile, commercialized processing technologies facilitated rare earth oxide production and consumption by a growing array of end-users.

NdFeB magnet manufacturers were one such consumer: in 1983, General Motors and Sumitomo of Japan independently announced the development of NdFeB magnets.

In 1986 General Motors established a subsidiary called Magnequench to commercialize production.

Magnequench began production of rapidly solidified powders for isotropic bonded magnets, full dense hot pressed isotropic magnets, and fully dense anisotropic magnets in 1987.

95 96

Joanne Abel Goldman, “The U.S. Rare Earth Industry: Its Growth and Decline,” Journal of Policy History 26 (2): 139-166, 2014,

https://doi.org/10.1017/S0898030614000013.

Ibid.

Jeffrey St. Clair, “The Saga of Magnequench,” Counterpunch, April 7, 2006,

https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/.

Ibid.

V. Panchanathan, “Magnequench Magnets Status Overview,” Journal of Materials Engineering and Performance, 4 (4) 423-429, 1995,

https://doi.org/10.1007/BF02649302.

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.

Starting in the second half of

the 1980s, several U.S. magnet companies licensed Sumitomo patents to produce and sell sintered NdFeB magnets.

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.

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

Joanne Abel Goldman, “The U.S. Rare Earth Industry: Its Growth and Decline,” Journal of Policy

History 26 (2): 139-166, 2014,

https://doi.org/10.1017/S0898030614000013.

John Ormerod, “NdFeB Magnet Patents: Updated 2021,” Bunting, n.d.,

https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/.

Joanne Abel Goldman, “The U.S. Rare Earth Industry: Its Growth and Decline,” Journal of Policy History 26 (2): 139-166, 2014,

https://doi.org/10.1017/S0898030614000013.

100

John Ormerod, “NdFeB Magnet Patents: Updated 2021,” Bunting, n.d.,

https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/

; “Certain Neodymium-Iron-Boron Magnets, Magnet Alloys, and Articles Containing Same: Investigation No. 337-TA-372,” U.S. International Trade Commission, May 1996,

https://usitc.gov/publications/337/pub2964.pdf.

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,

https://doi.org/10.1017/S0898030614000013.

103

Jeffrey St. Clair, “The Saga of Magnequench,” Counterpunch, April 7, 2006,

https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/.

104

Walter Benecki, “Magnetics Industry Overview,” 2005,

http://www.waltbenecki.com/uploads/Another_Year_of_Significant_Change_in_the_Magnetics_Industry.pdf.

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.

107 108

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.

109 110

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.

111 112 113

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.

114 115

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,

https://www.defensenews.com/opinion/commentary/2019/11/12/the-collapse-of-american-rare-earth-mining-and-lessons-learned/

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,

https://doi.org/10.1017/S1468109918000385.

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,

http://dx.doi.org/10.1016/j.resourpol.2014.03.004

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,

https://cdn.cfr.org/sites/default/files/pdf/2014/10/Energy%20Report_Gholz.pdf

112

Joseph Gambogi, “Mineral Commodity Summaries: Rare Earths,” U.S. Geological Survey, January 2017,

https://d9-wret.s3.us-west-2.amazonaws.com/assets/palladium/production/mineral-pubs/rare-earth/mcs-2017-raree.pdf.

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,

https://www.latimes.com/business/la-fi-molycorp-rare-earth-bankruptcy-20150625-story.html.

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.

116 117

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.

Table 2—Total U.S. Demand for Selected

NdFeB

Magnet Applications, Thousands of Tons *

Application

Total demand in 2020

Amount

(kt)

(percent)

Projected total

demand in 2030

(high growth)

Amount

(kt)

(percent)

Projected total

demand in 2050

(high growth)

Amount

(kt)

(percent)

Offshore wind turbines

0.0

10.1

27.3

27.7

Electric vehicles

1.8

11.2

10.2

27.6

23.1

33.7

Consumer electronics (hard disk drives, cell phones, loudspeakers, other)

7.2

44.7

7.4

20.0

11.8

17.2

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 bikes)

0.1

0.6

0.1

0.3

0.2

0.3

Bonded magnets

0.6

3.7

0.8

2.2

1.3

1.9

Total

16.1

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

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].

120 121

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,

https://dataweb.usitc.gov/trade/search/Import/HTS

120

“Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth,” The White House, June 2021,

https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.

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,

https://www.cisa.gov/critical-infrastructure-sectors.

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.

https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets?msclkid=9f790985ac5011eca53be28a54128eac.

[TEXT REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT REDACTED]

125

[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,

https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets

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.

129 130

[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

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,

https://www.defense.gov/News/Releases/Release/Article/2488672/dod-announces-rare-earth-element-award-to-strengthen-domestic-industrial-base/

130

Unless otherwise stated, all values cited in this report are U.S. dollars.

131

“2021 Annual Report,” Lynas Rare Earths, Ltd., 2021,

https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf

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,

https://investors.mpmaterials.com/investor-news/news-details/2022/MP-Materials-Awarded-Department-of-Defense-Heavy-Rare-Earth-Processing-Contract/default.aspx

134

“Form 10-K,” MP Materials, February 28, 2022,

https://d18rn0p25nwr6d.cloudfront.net/CIK-

0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf

135

“DoD Announces $77.3 Million in Defense Production Act Title III COVID-19 Actions,” Department of Defense, July 24, 2020,

https://www.defense.gov/News/Releases/Release/Article/2287490/dod-announces-773-million-in-defense-production-act-title-iii-covid-19-actions/

136

“DoD Announces Rare Earth Element Awards to Strengthen Domestic Industrial Base,” Department of Defense, November 17, 2020,

https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/

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.,

https://www.sbir.gov/?msclkid=fddb897aac5011ec87c1465b3f85f68e

139

“37 CFR 401.14—Standard patent rights clauses,” Cornell Law School Legal Information Institute, n.d.,

https://www.law.cornell.edu/cfr/text/37/401.14

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,

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/

141

“Defense Logistics Agency Research and Development: Small Business Innovation Programs,” Defense Logistics Agency, n.d. 2022,

https://www.dla.mil/Portals/104/Documents/SmallBusiness/Always%20Accountable%20Program%20Sheet_10%20NOV%202020.pdf?ver=2A6BDQejXejBr5xDhoLDyQ%3D%3D

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.

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,

https://www.netl.doe.gov/sites/default/files/2022-02/Program-141.pdf

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.

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,

https://www.energy.gov/articles/doe-awards-19-million-initiatives-produce-rare-earth-elements-and-critical-minerals

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

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.

144

Christopher Flavelle et al., “Climate Change Poses a Widening Threat to National Security,” The New York Times, October 21, 2021,

https://www.nytimes.com/2021/10/21/climate/climate-change-national-security.html

145

Renee Cho, “Climate Migration: An Impending Global Challenge,” Columbia Climate School, May 13, 2021,

https://news.climate.columbia.edu/2021/05/13/climate-migration-an-impending-global-challenge/

; 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,

https://doi.org/

10.1007/s10584-019-02560-0

; “Groundswell Part 2: Acting on International Climate Migration,” World Bank, September 13, 2021,

https://openknowledge.worldbank.org/handle/10986/36248

146

See

“Fact Sheet: President Biden Signs Executive Order Catalyzing America's Clean Energy Economy Through Federal Sustainability,” The White House, December 8, 2021,

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/

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.

147

See

“Executive Order on Strengthening American Leadership in Clean Cars and Trucks,” The White House, August 5, 2021,

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/08/05/executive-order-on-strengthening-american-leadership-in-clean-cars-and-trucks/

; “Fact Sheet: President Biden Announces Steps to Drive American Leadership Forward on Clean Cars and Trucks,” The White House, August 5, 2021,

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/

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.

148

Roland Gaus et al., “Rare Earth Magnets and Motors: A European Call for Action,” European Raw Materials Alliance, September 2021,

https://erma.eu/app/uploads/2021/09/01227816.pdf

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.

149 150

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.

149

Roland Gaus et al., “Rare Earth Magnets and Motors: A European Call for Action,” European Raw Materials Alliance, September 2021,

https://erma.eu/app/uploads/2021/09/01227816.pdf

; “Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

; 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,

https://doi.org/10.1016/j.wasman.2018.11.017

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,

https://erma.eu/app/uploads/2021/09/01227816.pdf

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.

153 154 155

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

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.

https://www.iea.org/reports/global-ev-outlook-2021

154

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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,

https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf

157

“Paul A. Eisenstein,” General Motors to source rare earth metals domestically for its electric vehicles,” NBC, December 9, 2021,

https://www.nbcnews.com/business/autos/general-motors-announces-deal-source-rare-earth-metals-electric-vehicl-rcna8265

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.

158

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

159

Roland Gaus et al., “Rare Earth Magnets and Motors: A European Call for Action,” European Raw Materials Alliance, September 2021,

https://erma.eu/app/uploads/2021/09/01227816.pdf

160

[TEXT REDACTED].

161

Roland Gaus et al., “Rare Earth Magnets and Motors: A European Call for Action,” European Raw Materials Alliance, September 2021,

https://erma.eu/app/uploads/2021/09/01227816.pdf

162

Shashi Barla, “Global wind turbine market: state of play,” Wood Mackenzie, April 14, 2021,

https://www.woodmac.com/news/opinion/global-wind-turbine-market-state-of-play/

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.

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,

https://www.energy.gov/sites/default/files/2021-08/Offshore%20Wind%20Market%20Report%202021%20Edition_Final.pdf

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.

164

Ibid.

165

“Global leadership grows: Siemens Gamesa solidifies offshore presence in U.S. with Virginia blade facility,” Siemens Gamesa, October 25, 2021,

https://www.siemensgamesa.com/newsroom/2021/10/offshore-blade-facility-virginia-usa.

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.

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,

https://dataweb.usitc.gov/trade/search/Import/HTS.

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).

167 168

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.

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

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,

https://dataweb.usitc.gov/trade/search/Import/HTS.

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.

https://macropolo.org/analysis/permanent-magnets-case-study-industry-chinese-production-supply/.

170

“Annual Report 2021”, Shin-Etsu Chemical Co., Ltd., 2021,

https://www.shinetsu.co.jp/wp-content/uploads/2021/07/Annual-Report-2021-for-viewing.pdf.

BILLING CODE 3510-33-P

EN14FE23.000

EN14FE23.001

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.

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,

https://dataweb.usitc.gov/trade/search/Export/HTS.

EN14FE23.002

BILLING CODE 3510-33-C

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

HTS code

Product description

General

rate

(percent)

Preferential

rate

Japan

general

rate

EU general rate

174

8505.11.0070

Sintered NdFeB magnets

2.1

Free

2.2 percent.

8505.11.0090

Other permanent magnets and articles intended to become permanent magnets after magnetization of metal

2.1

Free

2.2 percent.

2805.30.0020

Neodymium metal

Free

2.7 to 5.5 percent.

175

2805.30.0015

Praseodymium metal

Free

2.7 to 5.5 percent.

2805.30.0050

Other rare earth metals, not intermixed or interalloyed

Free

2.7 to 5.5 percent.

2805.30.0090

Other rare earth metals, intermixed or interalloyed

Free

2.7 to 5.5 percent.

2846.90.20

Mixtures of rare earth oxides or rare earth chlorides

Free

Free to 3.2 percent.

176

2846.90.80

Mixtures of rare earth carbonates other than cerium carbonate

3.7

Free

Free to 3.2 percent.

Sources: “HTS Search,” U.S. International Trade Commission, last accessed April 19, 2022,

https://hts.usitc.gov/

; “Access2Markets,” European Commission, last accessed April 19, 2022,

https://trade.ec.europa.eu/access-to-markets/en/home

; “Japan's Tariff Schedule as of April 1 2022,” Japan Customs, last accessed April 19, 2022,

https://www.customs.go.jp/english/tariff/2022_04_01/index.htm.

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,

https://hts.usitc.gov/.

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.

178 179

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

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,

https://www.energy.gov/sites/default/files/DOE_CMS2011_FINAL_Full.pdf

Table 6—Expected Magnets Contained in Total Global Demand for Selected

NdFeB

Magnet Applications, Thousands of Tons *

Application

Total demand in 2020

Amount

(kt)

(%)

Total projected

demand in 2030

(high growth)

Amount

(kt)

(%)

Total projected

demand in 2050

(high growth)

Amount

(kt)

(%)

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 phones, loudspeakers, other)

35.1

29.4

10.6

65.4

8.7

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 bikes)

6.5

5.5

9.6

2.5

15.3

2.0

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

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,

https://www.greencarcongress.com/2022/04/20220420-adamas.html.

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.

[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

Country

Mining

185

(%)

Separation

186

(%)

Metal

refining

187

(%)

Magnet alloy

manufacturing

188

(%)

China

U.S

Myanmar (Burma)

Australia

Madagascar

India

Russia

Thailand

(

189

)

Malaysia

Estonia

Japan

Vietnam

Laos

Germany

Slovenia

Finland

U.K

Other countries

Source: “Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

; Daniel Cordier, “Rare Earths: Mineral Commodity Summaries 2022,” U.S. Geological Survey, 2022,

https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.

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,

https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

187

Current hypothesis based on expert consultation. “Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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,

https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf

191

Ibid.

192

“Neo Performance Materials MD&A,” Neo Performance Materials, 2021,

https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf

193

“Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,” Department of Energy, February 24, 2022,

https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf

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

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,

https://link.springer.com/article/10.1023/A:1008295500105

; S.P. Kothari and Jerold B. Warner, “Chapter 1—Econometrics of Event Studies,” Handbook of Empirical Corporate Finance, Volume 1, 2007,

https://doi.org/10.1016/B978-0-444-53265-7.50015-9

; Abigail McWilliams and Donald Siegel, “Event Studies in Management Research: Theoretical and Empirical Issues,” Academy of Management Journal 40 (3): 626-657, 1997,

https://doi.org/10.5465/257056

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

“Neo Performance Materials MD&A,” Neo Performance Materials, 2021,

https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf

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

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT

REDACTED]

[TEXT REDACTED]

8.1.2 Production of NdFeB Magnets and Magnet Components, 2017 to 2026

Rare Earth Element Production (Mining and Recycling)

Between 2018 and 2021, U.S. production of NdFeB magnet-related rare earths increased by [TEXT REDACTED] (

see

Figure 6).

200

Between 2022 and 2026, U.S. rare earths production is expected to increase [TEXT REDACTED]. For the full 2018 to 2026 period, U.S. rare earths production is expected to increase by [TEXT REDACTED]. Mining is expected to remain the predominant source of rare earths feedstock, occupying roughly [TEXT REDACTED] of production for the period. Recycling is expected to account for the remaining [TEXT REDACTED].

200

No production was recorded for 2017.

[TEXT REDACTED]

[TEXT REDACTED] [TEXT REDACTED]

Of the rare earths used in NdFeB magnets, neodymium and praseodymium account for [TEXT REDACTED] of the 2017 to 2026 market, with neodymium making up around [TEXT REDACTED] and praseodymium around [TEXT REDACTED]. Dysprosium production is slated to increase starting in [TEXT REDACTED] and will bring neodymium and praseodymium's combined market share down to [TEXT REDACTED] by 2026.

An increase in dysprosium production to over [TEXT REDACTED] in 2026 is significant due to previously cited concerns about single source concentrations in China.

201

Should dysprosium production develop, the United States may become a feasible alternative to China for some dysprosium sourcing.

201

Comments of USA Rare Earth 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.

[TEXT REDACTED]

Rare Earth Carbonates

Between 2023 and 2026, U.S. rare earth carbonates production is expected to increase [TEXT REDACTED] (

see

Figure 7).

202

Of these carbonates, those containing [TEXT REDACTED] are anticipated to be the main driver for this growth, accounting for [TEXT REDACTED] of total carbonates growth. Carbonates containing [TEXT REDACTED] make up most of the remaining production with small amounts of carbonates containing [TEXT REDACTED] expected to be produced starting in [TEXT REDACTED].

202

[TEXT REDACTED]

[TEXT REDACTED] [TEXT REDACTED]

[TEXT REDACTED]

Separated Rare Earth Oxides

Between 2023 and 2026, U.S. separated rare earth oxides production is expected to increase [TEXT REDACTED] (

see

Figure 8).

203

Of these oxides, [TEXT REDACTED] are the main driver of growth, accounting for on average [TEXT REDACTED] of total growth. [TEXT REDACTED], most of the remaining growth is due to [TEXT REDACTED] production, with a small [TEXT REDACTED] due to [TEXT REDACTED] and a negligible amount to [TEXT REDACTED].

203

No production was recorded for 2017 to 2021 [TEXT REDACTED].

[TEXT REDACTED]

[TEXT REDACTED] [TEXT REDACTED]

Rare Earth Metals

Between 2023 and 2026, U.S. rare earth metals production is expected to increase by [TEXT REDACTED] (

see

Figure 9).

204

At this production rate, the United States could produce between about [TEXT REDACTED] of NdFeB magnets.

205

Of these metals, [TEXT REDACTED] rare earth metal is the main driver for growth, accounting for on average [TEXT REDACTED] of total rare earth metals growth. [TEXT REDACTED] will make up much of the remaining growth. The Department expects U.S. firms will refine negligible amounts of [TEXT REDACTED].

204

No production was recorded for 2017 to 2021 [TEXT REDACTED].

205

The Department reached this esti

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