Permanent Magnetic Material Consumption(2007)

May 15, 2008 Terry K. Clagett 1

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Permanent Magnetic MaterialConsumption May Be Teetering on the

BrinkTerry K. Clagett

WebMagnetics, Inc.P.O. Box 1448

Elizabethtown, KY 42702-1448

May 15, 2008


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Permanent Magnetic MaterialConsumption May Be Teetering on the Brink

On the Brink of Continued Steady Growth


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Permanent Magnetic Material2007 Global Sales

Ferrite

Metric Tons (mT) x 1,000

Ridged Bonded (Injection Molded) 25.6 mTFlexible Bonded (Sheet and Strip) 155.2 mTSintered 544.2 mT

Total 725.0 mTUS$ x 1,000,000

Ridged Bonded (Injection Molded) $ 296.8Flexible Bonded (Sheet and Strip) $ 393.4Sintered $2,569.8

Total $3,260.0


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NdFeB


Ridged Bonded (Injection Molded) 5.3 mTSintered 55.7 mT

Total 63.0 mTUS$ x 1,000,000

Ridged Bonded (Injection Molded) $ 434.1Sintered $4,805.9

Total $5,240.0


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AlNiCo


Cast and Sintered 6.0 mT

US$ x 1,000,000

Cast and Sintered $145.0


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SmCo


Samarium Cobalt 3.0 mT

US$ x 1,000,000

Samarium Cobalt $310.0


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Metric Tons (mT) x 1,000Ferrite

Ridged Bonded (Injection Molded) 25.6 mTFlexible Bonded (Sheet and Strip) 155.2 mTSintered 569.2 mT

Total 725.0 mTNdFeB

Ridged Bonded (Injection Molded) 5.3 mTSintered 55.7 mT

Total 63.0 mTAlNiCo

Cast and Sintered 6.0 mTSmCo

Samarium Cobalt 3.0 mT

Global Total 797.0 mT


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UD$ x 1,000,000Ferrite

Ridged Bonded (Injection Molded) $ 296.8Flexible Bonded (Sheet and Strip) $ 393.4Sintered $2,569.8

Total $3,260.0NdFeB

Ridged Bonded (Injection Molded) $ 434.1Sintered $4,805.9

Total $5,240.0AlNiCo

Cast and Sintered $ 145.0SmCo

Samarium Cobalt $ 310.0

Global Total $8,955.0


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Permanent Magnetic Material

• All Permanent (Hard) MagneticMaterials – cast, sintered and bonded– are included.

• The worldwide Magnetics Industryhas seen steady growth over the past20+ years.

• Continued growth is forecasted forthe Permanent Magnet Industry.

• There are no emerging technologiesthat will threaten the PermanentMagnet Industry.

• There are materials (AlNiCo) andapplications (Meters & Instruments)that are declining.

• Growth in ceramic ferrite, NdFeB andnew applications will more than offsetdeclining materials and applications.

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

1985 1990 1995 2000 2005 2010 2015 2020

Year

US

Dol

lars

(X 1

,000

,000

)


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$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

1985 1990 1995 2000 2005 2010 2015 2020

Year

US

Dol

lars

(X 1

,000

,000

)

• The Global Sales of PermanentMagnetic Materials wereapproximately $9 billion in 2007.

• By 2010, the Global Sales ofPermanent Magnetic Material mayreach $11 billion.

• By 2020, the Global Sales ofPermanent Magnetic Material areprojected to reach $21 billion.


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$0

$2,500

$5,000

$7,500

$10,000

$12,500

$15,000

1985 1990 1995 2000 2005 2010 2020

Year

US

Dol

lars

(in

mill

ions

)

AlNiCo SmCo Ferrite NdFeB

• In terms of US Dollars, growth will begreatest in NdFeB.

• Ferrite will see reasonable growth.

• AlNiCo will see slight decline intonnage and a slight increase in USDollars due to price increases drivenby cobalt pricing.

• SmCo will increase slightly.

• The increase of NdFeB appears to bemuch larger than the increase inFerrite.

• Keep in mind that there is asignificant price/kg differencebetween NdFeB and Ferrite.


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0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1985 1990 1995 2000 2005 2010 2015 2020

Year

Met

ric T

ons

AlNiCo SmCo Ferrite NdFeB Total

• 797,000 mT of Permanent MagneticMaterials were produced in 2007.

• 1,338,000 mT are projected for 2020.

• The most widely used PermanentMagnetic Material is Ferrite – by avery wide margin.

• The Global Average Price/kg ofNdFeB is nearly 20 times greaterthan that of Ferrite.

• Large increases in Ferrite tonnagewill be seen as modest increases intotal value due to its low price/kg.

• Large increases in NdFeB tonnagewill be seen as huge increases intotal value due to its high price/kg.


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1,338,000 Metrics Tons by 2020?


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1,338,000 Metrics Tons by 2020?

There will be three key drives leading to this growth:• Increased Global Population.

• Increased Per Capita Consumption.

• Increased Number of Applications.


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0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1985 1990 1995 2000 2005 2010 2015 2020

Year

Met

ric T

ons

0

1

2

3

4

5

6

7

8

9

Wor

ld P

opul

atio

n (B

illio

ns)

Total World Population

Between 1985 and 2007:

• World Population grew by 37.3%

• Permanent Magnetic Materialsgrew by 283.4%

• Per Capita Consumption ofPermanent Magnetic Materialsincreased by 181%

Per Capita Consumption:

• 1985 – 0.042kg

• 2007 – 0.118kg


Permanent Magnetic Material1,338,000 Metrics Tons by 2020?


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Prices Will Increase• Raw Material costs will drive prices up.

• Labor rates will eventually begin to climb.

• Efficiencies, especially in NdFeB yields, will have to be addressed.


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Raw Materials• Cobalt Prices

• Increased 50% in the last 6 months of 2007

• Increased over 300% in the past 24 months.


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Raw Materials• Cobalt Prices

• Future upward pricing trend will be driven

by supply and demand. Batteries for

Hybrid Electric Vehicles (HEV) will be a

leader on the demand side.

• In the USA there was a 38% increase in

HEV registrations in 2007.

• Cobalt consumption by HEV will double

between 2007 and 2020.


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Permanent Magnetic Material1,338,000 Metrics Tons by 2020?Raw Materials

• Neodymium (Sintered and Bonded NdFeB)• It is reported that China has 80% of the world’s Neodymium deposits.

• In 2006 / 2007, mining in China was uncontrolled. There were dozens of small inefficientmines. These mines flooded the Chinese domestic markets and competed against eachother, driving the price of Neodymium well below true market value. Many exported toget higher prices.

• The Chinese government stepped in. They reduced to mines to just a few andimmediately set production quotas.

• Demand begin to out pace supply and the price began to climb.

• Pricing has reached its “Tipping Point”, tipping in favor of America, Canadian andAustralian mines who had halted production when the prices fell below true marketvalue. They are gearing up production once again, but these mines are a year awayfrom high volume production.

• Even with North American and Australian production , demand will continue to out pacesupply.


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Raw Materials• Iron Oxide (Sintered and Bonded Ferrite)

• There are two primary sources of Iron Oxide:

• Mined Magnetite – high cost and low purity, too expensive to refine it to suitablegrades.

• Steel mills clean and de-scale their castings and rolled products in acid baths. Inthe USA and Europe, environmental laws prohibit the disposal of the acid, so theacids are cleaned and regenerated for reuse. A byproduct of the regenerationprocess is Iron Oxide:

• Regeneration using a fluidized bed process yields “Lurgi Iron Oxide”. The Lurgimaterial requires additional milling before it is suitable for magnet production.

• Regeneration using a spray roaster process yields “Rutherner Iron Oxide”which is the most suitable material for magnet production.


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Raw Materials (Continued)• Iron Oxide (Sintered and Bonded Ferrite)

• Chinese Steel Mills were never burdened with environmental issues, so they were notproducing Iron Oxide as a byproduct. Many Chinese magnet producers actually boughtRuther Iron Oxide from the US and Europe. But this is changing. Chinese Steel Millsare beginning to regenerate their acids, which just increase the supply of usable IronOxide.

• As the Steel Industry moves to China, China will eventually become the world’s largestproducer of magnet grade regenerated Iron Oxide.


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Raw MaterialsCobalt (Cast and Sintered AlNiCo) Trending Up

Neodymium (Sintered and Bonged NdFeB) Trending UP

Iron Oxide (Sintered and Bonded Ferrite) Stable


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End Markets -• Automotive (Motors, Actuators, Sensors)

• Continued global growth is forecast.• 2006 / 2007 Model Year – 73,000,000 motor vehicles were produced globally.• Future growth will come primarily from emerging economies.

• Privately owned cars in China – 11,500,000.• Number of cars added to Beijing roads daily – 1,000• Chinese government begin encouraging private ownership of cars in 1994.• Number of privately owned cars per 1,000 residents in China – 9; in USA 450• Year in which China is expected to have more cars than does the USA - 2025• Rank of China among hottest markets for Rolls-Royce – 1• Number of McDonald’s drive thought windows in China in 2005 – 1

Source – National Geographic


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End Markets• Automotive (Motors, Actuators, Sensors)

• The number of magnets per vehicle will continue to increase.

• More luxury options – power seats, windows, antennas, door locks, sun roofs, etc.• Energy and efficiency improvement – reducing the number of engine slaves; power

steering, air conditioning steal power and fuel from the engine. The car of the future willhave one engine slave, an alternator to charge the battery. Everything else will run off thebattery – electric power steering, air conditioning, etc.

• New innovations such as electronically tuned engines, electronic suspensions systems,directional head lamps and drive-by-wire features will all use magnets in sensors, motorsand actuators.

• Hybrid Electric Vehicles will use electric motors in conjunction with gas engines. Somewill actually have a drive motor for each wheel. Not all motors will be Permanent MagnetMotors, but PM Motors, both ferrite and NdFeB, will clearly play a key role.




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End Markets• Non Automotive / General Purpose Permanent Magnet Motors (Including non

automotive Battery Electric Vehicles)

• Energy Efficiency is the primary drive:

• The trend is toward Permanent Magnet Industrial and General Purpose Motorsbecause they are typically more energy efficient than induction motors.

• Mechanical and hydraulic drives, actuators and positioning devices are beingconverted to Permanent Magnet Servos and Actuators.

• More and more heavy equipment, off-road vehicles are going all electric to save fuel.• Electric Bicycles – up to 50% of all bicycles in many Chinese cities are e-bikes.

• China is forecasting the production of 20 million e-bikes in 2008.• Look for more conversion of very inefficient single cylinder gas engines to battery

operated electric motors. There are more single cylinder motor scooters in Taiwanthan there are people. Each of those engines emit more pollutants per mile driventhan an automobile.


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End Markets• Medical (including MRI)

• As MRI technology moves into developing countries, the technology will be supportedby Permanent Magnet MRI because the clinic locations will not be able to supportelectromagnetic and/or superconductive technology.

• Look for increased use of Magnetic Navigation for catheterization procedures.

• Medical pumps use magnetic linkage and drives.

• All Operating Room hand held power tools are cordless, rechargeable PermanentMagnet Motor driven.


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End Markets• Consumer Electronics (DVD, CD, Cell Phones, Loudspeakers, etc.)

• Again, the need for energy efficiency will be the driving force:

• Fewer and fewer household and kitchen appliances will have a cord. They willbecome rechargeable battery Permanent Magnet Motor driven.

• Washing Machines and Dryers will eliminate old induction motors and mechanicaltransmissions for direct drive Permanent Magnet motors.

• As more disposable income is generated in developing countries, more DVD / CDPayers, cell phones, etc will be sold.

• Loudspeakers suffered when the Consumer Electronics Industry moved towardearphones and headset. Home entertainment centers are assisting in the recovery.


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End Markets• Voice Coil Motors (VCM) / Hard Disk Drives (HDD)

• There are 6.6 billion people in the world and only 1.3 billion of them have access to theInternet. That means 5.3 billion people are in need of access to a computer for Internetaccess.

• HDD applications have grown beyond PC’s and Laptops to include digital videorecorders, digital audio players, personal digital assistants, digital cameras and videogame consoles.

• Flash Memory is a competitive technology that does not use magnets. It has and willfind its niche:

• Cost per gigabyte of flash memory remains significantly higher than that of platter-based hard drives.

• Other limitation exist.

• It is an attractive “solid state” technology where ruggedness and durability areissues.


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End Markets• Military / Defense / Aerospace

• As the military moves toward remote warfare and smart weapons, the need for magnetsincrease in the robotics and guidance systems.

• We are seeing a trend toward battery electric vehicles to reduce the need for fuel on thefront line.

• You cannot go to war, launch a satellite, drive a tank, sail a ship, launch a missile or fly astate-of-the-are aircraft without HDD’s.

• Even in a completely peaceful world, there will be a need for satellites forcommunications, weather, etc. All depend on Permanent Magnets for their servos,actuators, and sensors.


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End Markets• Material Handling / Separation

• Ore separation equipments made with NdFeB magnets can go back through old minetailings and retrieve usable ore that previous equipment would have missed.

• Companies like Eriez Magnetics and Bunting Magnetics have built entire product lineson magnetic conveyors and holding / lifting / clamping / sweeping devices.


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End Markets• Power Generation (Wind, Wave, Flywheel)

• The landscape of the future is likely to include windmills.

• Sections of the ocean will likely use waves to generate electricity.

• Many vehicles will likely include magnetic flywheels to recover and convert excess orwasted energy into electricity.


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End Markets

Automotive (Motors, Actuators, Sensors) Growth

Non Automotive / General Purpose Permanent Magnet Motors Growth

Medical (including MRI) Growth

Consumer Electronics Growth

Voice Coil Motors (VCM) / Hard Disk Drives (HDD) Growth

Military / Defense / Aerospace Growth

Material Handling / Separation Growth

Power Generation (Wind, Wave, Flywheel) Growth


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Summary – 1,338,000 Metric Tons by 2020???Yes!• Global population growth will contribute to the overall consumption of Permanent Magnetic

Materials.

• The largest population growth will come in emerging economies.

• Emerging economies will increase their per capita consumption of Permanent MagneticMaterials.

• Application will continue to grow based on the need for energy efficiencies, convenienceand quality of life.


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Summary – 1,338,000 Metric Tons by 2020???Yes!

797,000 mT in 2007 + [A x (B + C + D)] = 1,338,000 mT in 2020

A – 2007 World Population (6.6 billion people).

B – 2007 per capita consumption of Permanent Magnetic Materials (0.118kg).

C – Increase in per capita consumption between 2007 and 2020 due emerging economies.

D – Increase in per capita consumption between 2007 and 2020 due to increased applications.

With a little luck, I will review my predictions with you at the “2021 Magnetics Conference”


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Thank You!


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Terry K. ClagettPresident, CEO and Co-founder

WebMagnetics, Inc.

Terry has over 30 years of progressively responsible experience in sales,sales management, market development, marketing and general management.He has served the permanent magnet and sealant and adhesive equipmentindustries at Colt Industries, the Allen-Bradley Company, Crucible Steel andAccumetric. After demonstrated successes in domestic sales and marketing,he established international sales organizations serving the European,Canadian, Chinese, Asian and South and Central American markets, includinga magnet distribution center in Sheffield, England. His permanent magnetexpertise includes cast, sintered and bonded materials - AlNiCo, ferrite,samarium cobalt, and neodymium-iron-boron. Additionally, he has executivemanagement experience with off-the-shelf and custom designed equipmentfor dispensing single and plural component reactive chemicals such asepoxies, polyurethanes (flexible and ridge foams), urethane elastomers andsilicones. He has served on the Board of Directors of the Magnetic MaterialProducer's Association (MMPA) / International Magnetics Association (IMA)and on the Editorial Review Board of Adhesive Age Magazine. He has writtennumerous articles and papers for various trade publications, conferences,seminars and trade shows. He holds a B.S. with majors in Chemistry andBiology from Murray State University.

Permanent Magnetic Material Consumption(2007)

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