As some may have noticed, prices for neodymium magnets have risen considerably over the past 12 months. This development isn't limited to individual magnet shops or manufacturers — it's a trend that applies across the board. Below, we'll look at why prices are rising and how things may develop going forward.
COVID-19
The biggest contributor to higher neodymium magnet prices is undoubtedly COVID-19 and all its knock-on effects. Some of the other causes of price increases we'll discuss can therefore be directly linked to COVID-19.
The pandemic triggered a series of events, the most significant being the quarantine rules that most countries introduced to protect their populations and healthcare systems. This applies especially to China, where most magnets are produced. China has operated a zero-tolerance policy, meaning that a single infected person can result in cities with millions of inhabitants being shut down. Factories can therefore close from one moment to the next, which means it takes longer to produce magnets. Production times have increased and become unpredictable.
Increased demand
Demand for magnets has risen enormously since COVID-19 emerged. People are spending far more time at home due to quarantine rules and are spending their money differently than before. The annual holiday trip has been cancelled, for example, and instead people are buying things for their homes and home offices. These items often contain neodymium magnets — speakers, computers, toys, door holders, and many other things.
Another factor driving demand, unrelated to COVID-19, is the popularity of electric vehicles. Most electric cars require powerful magnets to convert electricity into momentum, so car manufacturers are placing large orders for neodymium magnets in China. This contributes to higher prices.
Electricity shortages
As mentioned, most magnets are produced in China, which is struggling to supply enough electricity to the country's homes and businesses. Some factories have therefore been placed under restrictions, only allowed to produce a few days per week to reduce pressure on power plants. Again, this is a factor that increases delivery times and prices.
Neodymium as a political leverage tool
Neodymium is what's called a rare earth element. This shouldn't be understood to mean there isn't much neodymium — on the contrary, there's plenty of the material, but it's difficult, expensive, and polluting to extract. Most Western countries have therefore left neodymium extraction to China, which hasn't been slow to use this monopoly as a stick and carrot against countries that don't behave as China wishes.
Increased shipping costs
The increased demand has also increased traffic on the world's oceans, and today it takes longer and costs more to transport a shipping container from China to Europe. Freight ships are overbooked carrying goods to consumers. Ports in China are regularly shut down when COVID-19 cases are detected, and most recently the container ship Ever Given got stuck in the Suez Canal. Such events have increased shipping costs by more than 300% over the past two years.
It will take a long time for freight rates to come down. COVID-19 is gradually disappearing and hopefully more ships blocking the Suez Canal will be avoided, but other challenges are looming on the horizon. The transition to green shipping, for example, is an enormous task that shipping companies must tackle in the coming years, and the cost of the transition will be huge.
Summary
In short, neodymium magnet prices are historically high, and they will remain so in 2022. Hopefully prices will fall in 2023 and stabilise, but they will settle at a higher level than we've been used to. Over the past two to three years, neodymium prices have risen by more than 200%, and over the past 12 months by 80%. Whether future prices will stay in the current range or climb higher remains to be seen.
If you only buy a few magnets, the price increases probably don't matter much. But if you use many magnets or are developing a product that contains magnets, you should be aware that this is a factor that could increase the cost of manufacturing your product.