Hey everyone, this was sent to all Eminence dealers by Eminence president Chris Rose. It's a good read and I thought I would post it here:
06/15/11
Eminence Update on Neodymium Prices and Availability
Dear Valued Friends and Customers,
We have been anxiously awaiting the appropriate time to update you on the crisis that continues in our industry with rare earth minerals, and more specifically neodymium magnets. Unfortunately, price and availability are volatile and likely to remain so for some time. However, several key events have occurred recently that are very relevant, and will be of critical importance to you as neodymium customers.
On June 2nd, we were informed by our magnet supplier that they could not accept a recent Eminence order for neodymium magnets because (and I quote the supplier here),
"the rare earth mines have stopped selling until the Chinese Ministry of Minerals revises the 2011 quota. The existing quota for how much RE can be mined was set in December and will run out by August. That means unless they increase the quota, the mines will not be allowed to sell any more RE until January 2012. It is widely expected that the quota will be increased because too many factories would shut down. I just talked to some of our competitors that I get along with and they all told me the same thing, that no new quotes or orders are being accepted in China."
We were informed that the expectation was for the Chinese Ministry of Minerals to announce a revision in quotas by Wednesday, June 8th. The announcement has yet to come, but rumored to be soon. The general consensus is that the quota will allow for maintaining consumption rates exhibited thus far this year.
We have been in daily contact with our magnet supplier and expressed that we simply must have supply to meet our customer’s needs. Despite the fact that sales of neodymium magnets and consumption of ore are effectively on hold in anticipation of the quota announcement, we have managed to get our supplier to agree to honor some of our recent orders, but not without concessions. These terms and conditions are challenging and concerning. Until further notice any new orders for neo magnets will require 80% prepayment terms (magnet suppliers have to prepay 100% of their ore costs). Further, their ability to meet demand going forward is doubtful unless the quotas are increased. Some magnet prices have already escalated in excess of 50% since June 1, and will remain a moving target. As of today, most magnet suppliers will not even provide us with a quote.
At least until the quota announcement, this is a precarious situation for all of us dependant on neodymium products. The details of the announcement will of course dictate conditions thereafter, but we do not expect significant relief. In the meantime, Eminence has decided not to place any stock orders for neodymium magnets, and would discourage customers from ordering OEM neo products during this period as well. If you are desperate, we’ll do our best to obtain a quote for you and try to work towards meeting your needs, but expect challenges!
For those of you dependant on our branded Eminence products from stock, we will continue production to meet demand while existing magnet stocks remain, and then revisit the situation after the quota announcement.
There are many schools of thought with regard to the future for neodymium and rare earth minerals. Until there is a quota announcement, additional availability is virtually non-existent. If you can find the magnets, and can get a quote, the prices will be astronomical, and pre-payment will be standard. The Eminence position is that purchasing during this period would represent significant risk.
We have mentioned before, and want to highlight again that there is not a shortage of rare earth minerals. Chinese companies have built facilities just for the storage of these materials and are stockpiling as much as they can on speculation. The Chinese clearly want the rare earths for their own use. The export quota has moved from 70,000 tons in 2009, to 30,000 tons in 2011, while the domestic quota increases at a similar rate.
If the quota announcement represents a reasonable alignment with usage thus far this year, we hope it will result in some reduction in prices perhaps somewhat in line with where they were in May. We expect pre-payment terms would continue on for some time.
Also worthy of note, we have heard that the United States and European Union have both filed suit against China for restricting the trade of rare earth minerals. While this may help to a small degree, we all know the time involved for such an effort to be effective.
For the long term, we are currently skeptical of the viability for continued use of neodymium magnets in loudspeakers. We do not profess to be economist, but many factors lead us to this conclusion:
• China’s domestic production quotas increase while export quotas decrease
• China controls over 95% of the actively mined rare earth mineral reserves
• No new mining projects outside China represent significant production volume that will be available for sale for non-government related applications
• Hybrid car and windmill production dwarf neodymium usage in other industries as does the ability of these industry’s to strategically purchase and manage raw materials
• There is some speculation that China will deplete their most manageable rare earth reserves within 10-20 years
Eminence will endeavor to continue to remain well informed on the details of this situation and disseminate that information to you as quickly as possible. Like you, we have a vested interest in the future of these products, but our primary interest remains in the long term health of our company and yours. It is our hope that conditions will change in order to maintain neodymium as a viable alternative in loudspeaker designs for the future. We would however, be remiss if we did not recommend that our customers be extremely cautious during this period and as they look to their future plans for these products.
Sincerely,
Chris Rose
President
Eminence Speaker LLC
06/15/11
Eminence Update on Neodymium Prices and Availability
Dear Valued Friends and Customers,
We have been anxiously awaiting the appropriate time to update you on the crisis that continues in our industry with rare earth minerals, and more specifically neodymium magnets. Unfortunately, price and availability are volatile and likely to remain so for some time. However, several key events have occurred recently that are very relevant, and will be of critical importance to you as neodymium customers.
On June 2nd, we were informed by our magnet supplier that they could not accept a recent Eminence order for neodymium magnets because (and I quote the supplier here),
"the rare earth mines have stopped selling until the Chinese Ministry of Minerals revises the 2011 quota. The existing quota for how much RE can be mined was set in December and will run out by August. That means unless they increase the quota, the mines will not be allowed to sell any more RE until January 2012. It is widely expected that the quota will be increased because too many factories would shut down. I just talked to some of our competitors that I get along with and they all told me the same thing, that no new quotes or orders are being accepted in China."
We were informed that the expectation was for the Chinese Ministry of Minerals to announce a revision in quotas by Wednesday, June 8th. The announcement has yet to come, but rumored to be soon. The general consensus is that the quota will allow for maintaining consumption rates exhibited thus far this year.
We have been in daily contact with our magnet supplier and expressed that we simply must have supply to meet our customer’s needs. Despite the fact that sales of neodymium magnets and consumption of ore are effectively on hold in anticipation of the quota announcement, we have managed to get our supplier to agree to honor some of our recent orders, but not without concessions. These terms and conditions are challenging and concerning. Until further notice any new orders for neo magnets will require 80% prepayment terms (magnet suppliers have to prepay 100% of their ore costs). Further, their ability to meet demand going forward is doubtful unless the quotas are increased. Some magnet prices have already escalated in excess of 50% since June 1, and will remain a moving target. As of today, most magnet suppliers will not even provide us with a quote.
At least until the quota announcement, this is a precarious situation for all of us dependant on neodymium products. The details of the announcement will of course dictate conditions thereafter, but we do not expect significant relief. In the meantime, Eminence has decided not to place any stock orders for neodymium magnets, and would discourage customers from ordering OEM neo products during this period as well. If you are desperate, we’ll do our best to obtain a quote for you and try to work towards meeting your needs, but expect challenges!
For those of you dependant on our branded Eminence products from stock, we will continue production to meet demand while existing magnet stocks remain, and then revisit the situation after the quota announcement.
There are many schools of thought with regard to the future for neodymium and rare earth minerals. Until there is a quota announcement, additional availability is virtually non-existent. If you can find the magnets, and can get a quote, the prices will be astronomical, and pre-payment will be standard. The Eminence position is that purchasing during this period would represent significant risk.
We have mentioned before, and want to highlight again that there is not a shortage of rare earth minerals. Chinese companies have built facilities just for the storage of these materials and are stockpiling as much as they can on speculation. The Chinese clearly want the rare earths for their own use. The export quota has moved from 70,000 tons in 2009, to 30,000 tons in 2011, while the domestic quota increases at a similar rate.
If the quota announcement represents a reasonable alignment with usage thus far this year, we hope it will result in some reduction in prices perhaps somewhat in line with where they were in May. We expect pre-payment terms would continue on for some time.
Also worthy of note, we have heard that the United States and European Union have both filed suit against China for restricting the trade of rare earth minerals. While this may help to a small degree, we all know the time involved for such an effort to be effective.
For the long term, we are currently skeptical of the viability for continued use of neodymium magnets in loudspeakers. We do not profess to be economist, but many factors lead us to this conclusion:
• China’s domestic production quotas increase while export quotas decrease
• China controls over 95% of the actively mined rare earth mineral reserves
• No new mining projects outside China represent significant production volume that will be available for sale for non-government related applications
• Hybrid car and windmill production dwarf neodymium usage in other industries as does the ability of these industry’s to strategically purchase and manage raw materials
• There is some speculation that China will deplete their most manageable rare earth reserves within 10-20 years
Eminence will endeavor to continue to remain well informed on the details of this situation and disseminate that information to you as quickly as possible. Like you, we have a vested interest in the future of these products, but our primary interest remains in the long term health of our company and yours. It is our hope that conditions will change in order to maintain neodymium as a viable alternative in loudspeaker designs for the future. We would however, be remiss if we did not recommend that our customers be extremely cautious during this period and as they look to their future plans for these products.
Sincerely,
Chris Rose
President
Eminence Speaker LLC
