US Magnet Materials Association The US Magnet Materials

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US Magnet Materials Association The US Magnet Materials Story Past-Present-Future

US Magnet Materials Association The US Magnet Materials Story Past-Present-Future

What do Magnets do? l l l Move and direct Electrons Provide Magnetizing &

What do Magnets do? l l l Move and direct Electrons Provide Magnetizing & Mechanical forces Electromagnets - need electrical current – – l Coil & “soft magnetic materials” Normal copper & superconductor Permanent Magnets – no electrical current – “Hard magnetic materials”

Permanent Magnet Types & Strength Max Energy Product (MGOe) Rare earths

Permanent Magnet Types & Strength Max Energy Product (MGOe) Rare earths

DOD Applications l l l l Inertial Guidance Electronic Warfare Microwave Communications (ship-shore, groundspace,

DOD Applications l l l l Inertial Guidance Electronic Warfare Microwave Communications (ship-shore, groundspace, space-ground) Motors (hydraulic systems, motion control) Generators (power for aircraft, ships) Space (actuators, electric propulsion) Nuclear reactors (pumps, control rod actuators)

DOD Platforms l Missiles – l Navy – l Aegis radar, Virginia Submarines, CVN,

DOD Platforms l Missiles – l Navy – l Aegis radar, Virginia Submarines, CVN, DDX, LCS, UUV’s, support “all electric ship” technologies, Firefinder RADAR Army – l Trident, Minuteman IV, Patriot, PAC III, Tomahawk Cruise Missiles, JDAM’s, Hellfire missiles, Harpoon Anti-ship M 1 A 1 tanks, Bradley A 3 and FIST, Paladin Howitzer, AH-64 Apache, Striker Humvee Air Force – – F-15, F-16, F-18, B-52, Joint Strike Fighter Unmanned Aerial Vehicles

China Dominates Magnet Materials Japan, US, European producers close plants, move production WW Total

China Dominates Magnet Materials Japan, US, European producers close plants, move production WW Total Market Size $7. 5 B (2006)Projected $11 B 2010 Nd. Fe. B magnets 75% (22% Japan) CHINA Rare Earth Oxide Ore production 94% (50% WW reserves) Rare Earth pure Metals nearly 100% Over ½ WW Alnico & Sm. Co production Hard ferrites 85+ %

Magnet Sales Worldwide l l l Data courtesy of Webmagnetics. com Market is growing

Magnet Sales Worldwide l l l Data courtesy of Webmagnetics. com Market is growing due to automotive & more uses, miniaturization Chinese are main beneficiaries of growth China will increase share & dominance

Magnet Prices $/kg Worldwide l l l China deflates price Artificial Chinese pricing makes

Magnet Prices $/kg Worldwide l l l China deflates price Artificial Chinese pricing makes US un-competitive Export subsidies provided Over capacity within China Critical Loss of Knowledge base Gross Chinese Patent Infringement Data courtesy of Webmagnetics. com

WW Rare Earth Oxide Production l l Source: US Geological Survey 1965 -1985 US

WW Rare Earth Oxide Production l l Source: US Geological Survey 1965 -1985 US major production 1985 -1990 China enters 1990 -2000 China mines dominate 2002 Last US mine closes

China Rare Earth Metals Price Manipulation l l l l Sources: metal-pages. com, China

China Rare Earth Metals Price Manipulation l l l l Sources: metal-pages. com, China Rare Earth Information Center China overcapacity drives out all other producers Government sets export caps & price minimums China established $100/ton fine for violations to price minimums (14 July 2005) High risk for other producers to invest on added capacity Inability to purchase Nd metals reported Rare earth metal buybacks from customers mandated at sub market level China views downstream user implications of price increases having positive effects Neodymium metal Price History – 1989 $42/kg – 2003 $8/kg – 2006 $28/kg – 2007 $52/kg – 2008 $40/kg

Recent Decline of US Magnet Industry l 2002 Mountain Pass, CA rare earth mine

Recent Decline of US Magnet Industry l 2002 Mountain Pass, CA rare earth mine suspends operations – – l 2003 Magnequench closes plant and moves equipment to China – l l former GM subsidiary 2003 VAC closes Elizabethtown, KY operations 2004 China National Offshore Oil Corp attempts to purchase Unocal – l world’s richest rare earth reserves only one in US owner of Molycorp and Mountain Pass rare earth mine 2005 Hitachi closes its Edmore, MI production facility – acquired from GE in 1990’s

Who survives in US Magnet Industry? Remaining US magnetic material producers: l l l

Who survives in US Magnet Industry? Remaining US magnetic material producers: l l l 3 Alnico magnet producers 1 Samarium Cobalt magnet producer 0 Neodymium Iron Boron magnet producers 2 Grain Oriented Electrical Steel (GOES) producers 0 Rare earth oxides or rare earth metals production 2 non-captive Ferrite producers If domestic magnet industry disappears, China will become a critical US defense supplier.

Who survives in US Magnet Production? Remaining US permanent magnet producers: Alnico Magnets l

Who survives in US Magnet Production? Remaining US permanent magnet producers: Alnico Magnets l Thomas & Skinner – – l Indianapolis, IN 170 employees l Arnold Magnetic Technologies – – Marengo, IL 140 employees Permanent Magnet Corporation – – Indianapolis, IN 50 employees Samarium Cobalt l Electron Energy Corporation, – – Landisville, PA 100 employees Hard Ferrites l Hoosier Magnetics, Inc. (ferrite powder) – – Ogdensburg, NY 50 employees If domestic magnet industry disappears, who will develop unique materials for mission specific DOD needs AND commercialize?

Why do we need the Specialty Metals Clause? l Vietnam War – l Sony

Why do we need the Specialty Metals Clause? l Vietnam War – l Sony withheld cameras used to guide tactical missiles 1983 – Socialists in the Japanese Diet blocked the sale of ceramic packaging used in U. S. cruise missiles

Why do we need the Specialty Metals Clause? l 2002 – Hellfire Missile production

Why do we need the Specialty Metals Clause? l 2002 – Hellfire Missile production stopped during West Coast dock strike l l critical parts sourced in Japan were awaiting off-loading 2003 – JDAM bomb production stopped during Iraq war because Swatch Group refused to ship critical part l disagreed w/ Bush Administration policy

What’s Changed Recently -In General Terms l 2007 – – l Specialty metals removed

What’s Changed Recently -In General Terms l 2007 – – l Specialty metals removed from the Berry Amendment (10 U. S. C. 2533 a) and codified separately at 10 U. S. C. 2533 b Clarified application to high-performance magnets 2008 – Revised specialty metals clause l l l exempts COTS (except for high-perf. magnets) includes a 2% de minimis rule (except for high-perf. magnets) Allows market basket approach to compliance – A contractor may certify that an appropriate percentage of material is of domestic origin.

Specialty Metals: Details of Enacted Changes l 2007 Defense Authorization Bill – Exempts electronic

Specialty Metals: Details of Enacted Changes l 2007 Defense Authorization Bill – Exempts electronic components l – whose specialty metals content is de minimis in value compared to the overall value of the lowest level electronic component produced that contains such specialty metal. Establishes a Strategic Materials Protection Board l Shall determine need to provide a long term domestic supply of materials designated as critical to national security Results: Relief for key concerns l l Small electronic components (solders, resistors, etc. ) Small hardware issues (nuts, bolts, fasteners, etc. ) Specifies application only to military systems One time amnesty 16 November 2006 (with compliance plan)

Specialty Metals: Details of Enacted Changes l 2008 Defense Authorization Bill – – Expands

Specialty Metals: Details of Enacted Changes l 2008 Defense Authorization Bill – – Expands the electronic components relief to give complete exemption Criticality of the domestic high-performance magnet industry to national defense noted l – “The conferees note that high-performance magnets have been fully or partially excluded from some of the exceptions added by this section. The conferees intend in doing so to ensure that the Department continues to procure such magnets from domestic sources whenever possible and consistent with this section. ” Requirement that 100% of the high-performance magnets used in military specific weapon systems be procured from domestic sources.

Specialty Metals: Details of Enacted Changes l 2008 Defense Authorization Bill – Commercial-Derivative Military

Specialty Metals: Details of Enacted Changes l 2008 Defense Authorization Bill – Commercial-Derivative Military Articles l l Weapon systems produced from a predominantly commercial platform Manufacturers must procure a majority of their highperformance magnet material from domestic sources. – Known as a “Market Basket” l Requires a certification from the prime contractor that they procured a qualifying amount of metal from domestic high performance magnet makers. l The greater of the equivalent of 120% of the weight of magnets used in military articles or 50% of the weight of all magnets used in both commercial and military articles.

Specialty Metals: Details of Enacted Changes l 2008 Defense Authorization Bill l De Minimis

Specialty Metals: Details of Enacted Changes l 2008 Defense Authorization Bill l De Minimis exception Allows producers a 2% margin or error in compliance with the specialty metals clause – Does not apply to high performance magnet material –

Strategic Materials Provision Applicability to Permanent Magnet Materials Hard (Permanent) Magnets l Three general

Strategic Materials Provision Applicability to Permanent Magnet Materials Hard (Permanent) Magnets l Three general types: – – Alnico Rare Earth l l – Sm. Co Nd. Fe. B Hard Ferrites l Soft Magnetic Materials Multiple types, including: – Powdered iron – Electrical steel – Soft Ferrites

USMMA SUMMARY l l US Magnet Materials Industry IS NOT DEAD 10 U. S.

USMMA SUMMARY l l US Magnet Materials Industry IS NOT DEAD 10 U. S. C. 2553 b Applies to US magnet Industry Permanent Magnets are critical to Military Hardware and weapons systems US Defense needs domestic advanced, specialized magnet technology capabilities for unique mission needs

“There is oil in the Middle East. There are rare earths in China. We

“There is oil in the Middle East. There are rare earths in China. We must take full advantage of this resource. ” Deng Xiaoping, 1992

Points of Contact Ed Richardson – Thomas & Skinner – off (317) 418 -0137

Points of Contact Ed Richardson – Thomas & Skinner – off (317) 418 -0137 x 116 cell (317) 920 -6170 - e-mail: [email protected] com Web www. thomas-skinner. com Peter Dent – Electron Energy Corp - off (717)459 -1001 cell (610) 349 -5525 - e-mail: [email protected] com Web www. electronenergy. com