Analysis: Tesla's electric motor shift to spur demand for rare earth neodymium

Namibia Critical Metals

13/03/2018 07:00

(Repeats with no changes to text)
    * Drive against noxious emissions pushes electric car use
    * Neodymium magnet motor market now worth $11.3 billion
    * Tesla's moves seen changing market's dynamics

    By Pratima Desai
    LONDON, March 12 (Reuters) - Tesla's shift to a magnetic
motor using neodymium in its Model 3 Long Range car adds to
pressure on already strained supplies of a rare earth metal that
had for years been shunned because of an export ban by top
producer China.
    Efforts by governments around the world to cut noxious
emissions produced by fossil fuel-powered cars is driving demand
for electric vehicles and the metals used to make them, such as
lithium and cobalt which are key ingredients for batteries.
    Now the spotlight is on neodymium. Several auto makers
already use permanent magnet motors that rely on the metal
because they are generally lighter, stronger and more efficient
than induction motors that are based on copper coils.
    But it is the switch to neodymium by Tesla, an auto maker
that has staked its future solely on the electric vehicle, that
is showing the way the industry is moving and the direction of
demand for the rare earth metal.
    Research group imarc estimates the market for the
neodymium-iron-boron magnet used in the motors is now worth more
than $11.3 billion, with demand for the magnets rising at a
compound annual growth rate of 8.5 percent between 2010 and
2017.
    "Some electric car motors use the permanent magnet
technology, probably the most famous is the Tesla Model 3 Long
Range. All the other Tesla models -- Model X and Model 3
standard -- use induction motors," said David Merriman, a senior
analyst at metals consultancy Roskill.
    Global demand of 31,700 tonnes for neodymium last year
already outstripped supply by 3,300 tonnes, he said. Demand was
expected to climb to 34,200 tonnes this year and 38,800 tonnes
in 2018, leaving larger deficits.
    "Tesla's decision to switch to permanent magnets has
completely changed the dynamics of the market," said a source at
a fund manager that specialises in metals.
    The price of neodymium is now about $70 a kg, well below the
$500 hit after China held back shipments to Japan in 2010 during
a row over disputed islands but it is still 40 percent higher
than at the start of 2017.
    China, which resumed neodymium exports in 2015, imposed
strict export quotas across a range of rare earth metal in 2010,
saying it wanted to curtail pollution and preserve resources.
    
    COSTLY PROCESS
    "People seem to have forgotten China's export ban. It could
happen again. China is really the main producer, no one else has
invested as much in rare earths," a rare earth trader said.
    Despite their name, rare earths are found in many places
around the world, but the process of extraction is difficult and
expensive, as it requires separating multiple different metals
from a single deposit. This is unlike the much simpler process,
for example, of recovering copper from ore.
    China has invested heavily in the rare earth metals process
but its crackdown on mining, smelting and other polluting
industries is forecast to slow supply. It already helped push
the neodymium price to a two-year high of $96 in September.
    "Rare earth production is as bad as you can get in terms of
environmental damage," the trader said. "China used its dominant
position before, what's to stop it doing so again?"
    Such supply concerns are encouraging automakers to search
for ways of cutting down neodymium use. Toyota Motor Corp
 7203.T  said last month it had found a way to cut use of the
metal in electric motors by about a fifth.   urn:newsml:reuters.com:*:nL8N1QA06B
    The Japanese firm said it had developed a magnet which
replaced some of the neodymium with more abundant and cheaper
rare earths -- lanthanum and cerium. Toyota aims to use the
magnets in electric vehicle motors within the next 10 years.
    Other manufacturers of electric vehicles that use permanent
magnets include BMW  BMWG , Nissan  7201.T  and Geely  0175.HK .
    Several companies produce rare earth metals outside China,
including London-listed Rainbow Rare Earths  RBWR.L ,
Canada-listed Namibia Rare Earths  NRE.V  and Australia's
Spectrum Rare Earths  SPX.AX .
    But, for now, auto makers making permanent magnet motors
remain heavily reliant on China, which according to Roskill
accounted for 85 percent of global output of rare earth oxide
estimated at 161,700 tonnes in 2017.
    Morgan Stanley analysts estimate electric vehicles will
total 50,000 units in 2020 or 2.3 percent of the total, rising
to 400,000 in 2025 or 17.4 percent, and 975,000 in 2030 or 40.9
percent.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Neodymium market balance    http://reut.rs/2FD6bUb
neodymium prices    http://reut.rs/2DlOHtE
Rate Earth Producers    http://reut.rs/2Fu5HnE
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 (Reporting by Pratima Desai
Editing by Veronica Brown and Edmund Blair)
 ((pratima.desai@thomsonreuters.com; +44 207 542 5113;))