Raw Materials Reloaded: Neodymium

China’s sanctions on magnet technology and implications for emerging technology innovation

Ever heard of neodymium? Probably not. I mean, what is this? High school chemistry class? Even if it was, this one still may have gotten past you and you could be forgiven for missing it.

What about neodymium-iron-boron? Even the shortened version is a mouthful and entirely forgettable: NdFeB. Neodymium is a rare earth element over which China exercises an effective monopoly in downstream mining and processing. It is also quietly becoming an element at the center of the geopolitical competition around emerging technologies. Most Americans are aware of US-imposed sanctions against export of the most advanced semiconductors to China. They are likely less aware of China’s sanctions against the US related to neodymium and the production of industrial magnets. While the US can claim some short-term victories in how the semiconductor sanctions impacted Huawei and ZTE, China has been building to a crescendo that most have not been watching. China’s ability to sanction not only the export of raw materials but also the downstream processes around them will create long-term challenges for emerging technology development in the US and the west. Neodymium is one example of many and control over its mining and refining has a direct impact on electric vehicle (EV) production as well as other applications.

While the US plays its hand with sanctions on semiconductors, China is playing its hand as well. China is focused on the long-term global dominance in raw materials and is refusing to play the same game the US is playing. There are significant implications to this dichotomy that may severely impact plans to onshore supply chains and manufacturing for several industries. Here, we will specifically focus on neodymium and the role that industrial magnets play in emerging technology development. So, grab your teenager’s chemistry book because it’s time to talk about rare earth magnets.

Rare Earths

REEs are a set of 17 elements found on earth that are not rare in the sense of being able to find them, but they do not occur in large and easily minable deposits. They are concentrated within rocks with many other elements meaning they must undergo a significant process to extract and isolate them. Think about a coal mine here a longwall sheer is running back and forth and mining literal tons of coal out of a concentration of coal. This is the opposite of REEs.

REEs must undergo a long and sometimes energy demanding process to be isolated and separated from other REEs and elements in a given rock. There is no such thing as a pure neodymium mine through there are deposits in slightly larger concentrations in China, Australia, and the US through levels of production vary. It is significantly more difficult to get an ounce of neodymium than it is to get other plentiful and concentrated elements from the earth.

A country that is developing technologies that require REEs are therefore required to not only have onshore access to REEs but also the industrial manufacturing capacity to process and refine the REEs into usable concentrations. This fact has never been lost on China as it has been focused for several years on protecting what it calls “state resources,” referring to its endowment of 30% of the world’s REE reserves. In 2011, China’s share of global production of REEs was at 97%, a number that should get anyone’s attention. As of 2022, that number was 70%, but it retains 85% of the world’s processing capacity. Processing doesn’t stop at mining and breaking the rocks into concentrated REEs. There’s also the requirement to form alloys, like our NdFeB mentioned earlier. Those alloys need to then be manufactured into the industrial magnets that are required for various applications in technology development. This is why in addition to boasting 30% of the world’s REE reserves and around 85% of its processing capacity, China took the additional step in 2023 of banning the export of technology that is specifically used to create industrial magnets. This kind of fortress building around what seems to be a highly niche industrial process should make you wonder if there’s something you don’t know.

Neodymium and Magnets

First, it’s important to discuss why neodymium is important for magnet production because NdFeB magnets are not just any old magnets.

They are the strongest permanent magnets that are commercially available. This path requires we reopen that chemistry book again.

Metals that retain their magnetic properties after being removed from a magnetic field are called ferromagnetic. The ability to have a magnetic metal without the requirement to externally provide a magnetic field is cost and energy effective. Obviously, not every metal is magnetic meaning that each material must exhibit properties that are ideal for creating a magnetic field. This corresponds to a lattice atomic structure and a permanent dipole movement of their electrons. Some materials are better arranged than other, so some materials make better magnets. Having more free electrons to exhibit the dipole movements and creating a magnetic field make an element a better magnet. This is where neodymium comes in, through there’s a very chilly catch.

Curie Temperature

The Curie temperature is the temperature above which magnets lose the ferromagnetism (thanks, Pierre). Neodymium has an excellent atomic structure and plenty of free electrons to grow up to become a wonderful magnet. It’s Curie temperature, however, is a chilly 19 degrees Kelvin. This being an international newsletter, that’s -254 degrees Celsius or -425 degrees Fahrenheit. That means that when the temperature is ABOVE -254 degrees Celsius, neodymium is NOT magnetic. That would be a problem for everywhere on earth except inside a quantum computer. Luckily, iron and boron come to the rescue. When mixed with iron and boron, neodymium can lend its considerable magnetic skills to earth-bound pursuits. Combining the atomic structures of neodymium with the comfortable Curie temperatures of iron and boron creates ultra strong permanent magnets that have applications all over the emerging technology spectrum.

Applications

Neodymium is an REE whose mining and processing is nearly entirely dominated by China. It alone is the most important ingredient in the most powerful magnets available today and those magnets are used in plenty of consumer facing and defense products.

Electric Vehicles

NdFeB magnets are essential to produce torque and overall energy efficiency for EVs. Without access to these magnets, EVs would be far less efficient and be able to drive less distance. Anxiety over how far an EV can drive already prevents some consumers from buying EVs, so a loss of access to the supply chain for NdFeB magnets would be a significant hit to the EV industry. Here is a breakdown of the role of NdFeB magnets in EVs:

High Efficiency and Torque:

• Their strength allows for the creation of powerful magnetic fields, which are essential for generating the torque (rotational force) needed to propel an EV.

• This results in highly efficient electric motors, meaning more of the battery's energy is converted into motion, leading to increased range.

Permanent Magnet Synchronous Motors (PMSMs):

• PMSMs offer advantages such as high-power density, compact size, and excellent efficiency.

Increased Range:

• Maximizes the distance an EV can travel on a single charge.

Improved Acceleration:

• The strong torque produced by these motors allows for rapid acceleration, a characteristic feature of many EVs.

Compact Motor Design:

• Enables the design of smaller and lighter motors, contributing to overall vehicle weight reduction.

Electric Power Steering (EPS):

• Providing precise and responsive steering control.

Regenerative Braking:

• Converts kinetic energy during braking back into electrical energy, recharging the battery.

Other Vehicle Systems:

• They are also found in various other electric motors throughout the vehicle, such as those used for electric pumps, fans, and other auxiliary systems.

Beyond EVs

EVs are an obvious and consumer facing product with real economic implications in the event of a supply chain disruption. NdFeB magnets also have applications across medical, renewable energy, and defense:

Wind Turbines:

• Direct-drive wind turbines, especially offshore ones, utilize powerful NdFeB magnets in their generators.

• The high torque capabilities of NdFeB magnets are crucial for capturing and converting wind energy.

Magnetic Resonance Imaging (MRI):

• NdFeB magnets are used in some MRI machines, contributing to the creation of strong and stable magnetic fields necessary for high-resolution imaging.

Medical Devices:

• They find applications in various medical devices, including those used in drug delivery, implants, and other therapeutic applications.⁴

Audio Equipment:

• High-quality headphones and speakers utilize NdFeB magnets to produce precise and powerful sound.

Hard Disk Drives:

• NdFeB magnets are still used in the actuators of traditional hard disk drives.

Smartphones and other devices:

• They are used in small motors, and other components in many modern electronic devices.

Robotic Motors:

• NdFeB magnets are essential for the compact and powerful motors used in robotics, enabling precise movement and control.

Automation Systems:

• They are used in various automation systems, including those in manufacturing and logistics.

Military Applications:

• NdFeB magnets are crucial in various defense systems, including missile guidance systems, radar systems, and other advanced technologies.

Aerospace Applications:

• They are used in aircraft systems, including electric motors and actuators.

Raw Materials Reloaded

The US made its economic move, and China is making its move. The US pressed China where it felt it could hurt it the most and where it had the most control, semiconductors. The US is still the leader in semiconductor design and the Chips and Science Act is putting money toward onshoring semiconductor production. While this move saw short-term success, there is already evidence to suggest that China is innovating around sanctions as the release of DeepSeek showed. While the US cannot be blamed for playing its card, China also gets a turn.

In contrast to the US, China chose to look far downstream of where the US was focused. China knew what its advantages were, significant REE reserves and a mature processing capability. China chose to build sanctions packages around its REE extraction and processing and further tightened those sanctions to specifically include technologies for making industrial magnets…TWO YEARS AGO.

The US may be able to onshore its semiconductor manufacturing, though such an effort would take many years even with federal funding.

However, China is making a bet that even if the US accomplishes its goals in semiconductor production, it will not be able to do the same simultaneously with neodymium and industrial magnets.

China already has a de facto monopoly on neodymium and other REEs far downstream of any finished products that would get to consumers. It also has a significant lead in battery technology as it strives to build reserve energy capacity through battery production. Combining its emphasis on batteries with its dominance in magnet technology adds up to a strategy that the US may not see coming and may not be prepared to defend against.

The US’s advantage is in design, which has real value but means little without the raw materials to make those designs real. China knows this and is pressing on it. US sanctions have taken the most valuable semiconductors out of the hands of Chinese innovators and hobbled Huawei and ZTE. However, the Chinese telecom industry remains, and its sanctions are coming from an entirely different direction. Americans and policy makers might yawn when they see a sentence that include “NdFeB industrial magnets,” but there are a lot of manufacturers that do not. There is more than one way to impose effective sanctions in great power competition and China is showing us one right now. The US must pay closer attention to the downstream requirements of emerging technology development before there is a Chinese monopoly that the US cannot recover from. Ultimately, China is on a path to dominate the next generation of energy technologies, and it has the patience to do so. Batteries, solar cells, and now magnets might not sound as sexy as semiconductors and probably don’t have a market cap that looks like NVIDIA, but they are no less important. This realization may come too late because it’s not that China is beating us, they are playing an entirely different game.

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Nick Reese is the cofounder and COO of Frontier Foundry and an adjunct professor of emerging technology at NYU. He is a veteran and a former US government policymaker on cyber and technology issues. Visit his LinkedIn here.

This post was edited by Thomas Morin, Marketing Analyst at Frontier Foundry. View his LinkedIn here.