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The Magnet Metal as Important to Electric Vehicles as Lithium

Written by Luke Burgess
Posted June 5, 2020

Magnets...

They're pretty much the most boring thing on Earth. They're about as exciting as waiting in line at the post office.

But magnets are a huge part of modern life. In fact, you likely rely on high-powered magnets every moment of your day.

As the world continues to modernize, more and more of these high-powered magnets will be needed to satisfy the demand for new technologies. And that creates great opportunities for substantial profits in a safe and steady market.

A New Type of Magnet Is Developed

Now, we're not talking about the magnets hanging on your fridge.

In the 1970s and 1980s researchers developed a new type of magnet using rare-earth elements. These rare-earth magnets produced magnetic fields that were 50% to 150% stronger than any other known magnet.

Since then, high-powered rare-earth magnets have been used to develop a wide variety of technologies and are today used in thousands of everyday objects. There's little doubt you have several rare-earth magnets surrounding you right now.

Tiny, high-powered magnets are used in laptops, tablets, and PC hard disk drives. They're used in smartphones, video game systems, blenders, vacuum cleaners, power tools, speakers, and in your motorized toothbrush.

Rare-earth magnets are used for the anti-locking braking system in your car. They're in MRI machines, blood separators, infusion pumps, and a wide range of other life-saving medical devices. They're in point-of-sale devices, electronic locks, airplanes, HVAC systems...

You get the picture. Tiny rare-earth magnets surround you like flies at a cookout. Remember those?

That means the market for these magnets is already substantial. Yet as the world continues to modernize, demand for high-powered magnets is still expected to climb much higher.

In 2018, the value of the global permanent magnet market was estimated to be $17.85 billion. By 2026, analysts expect the market to be worth $34.70 billion.

But there's one very specific market where demand for rare-earth magnets is expected to grow by leaps and bounds: the electric vehicle market.

The Magnet Metal as Important to Electric Vehicles as Lithium

You already know electric vehicles need lithium for their batteries. But they also need very strong magnets for their motors.

Every electric motor works like this: An electric current is directed through a magnified field. This produces motion and converts electrical energy into mechanical energy.

Permanent magnets (the north and south magnets in the illustration above) are used to create this magnified field.

Now, the best permanent magnets for electric motors are made with neodymium. That's simply because neodymium magnets are the most powerful.

A neodymium magnet weighing only a few grams can lift a thousand times its own weight. Back in 2017, scientists at Florida's National High Magnetic Field Laboratory (MagLab) used neodymium to create the world's most powerful magnet. Nicknamed Project 11, it generates a field strength that's over 800,000 times more powerful than the Earth's.


World's Strongest Magnet: Project 11 at MagLab

Neodymium magnets are named after the hard-to-pronounce element. But the magnets themselves are made of a neodymium/iron/boron alloy. They're cheaper to produce, lighter, and stronger than any other high-powered magnet known today.

As a result, the EV industry is projected to be the fastest-growing end-use industry segment in the neodymium magnet market. And that means the demand for raw neodymium is expected to soar.

But there's a bit of a problem: like other vital materials to the EV revolution, including cobalt, neodymium mines are scarce.

Neodymium is classified as a rare earth metal, although it's not technically all that rare. Neodymium is not much rarer than copper or nickel. The term "rare earth" applies to a category of elements that have similar chemical properties.

But actually, mining neodymium involves a host of other variables. Most important to global supplies, however, is geopolitics.

Over 90% of the world's neodymium and other rare earth elements are currently produced in one country: China.

Inside the Chinese borders are over 40% of the world's rare earth resources. And geopolitics can easily make mineral supplies scarce.

In 2010, China cut its rare earth exports by 40% and completely cut off supplies to Japan over a territorial dispute. This caused prices for all rare earths, including neodymium, to soar. The halt in supplies was globally challenged by several nations, resulting in a ruling against China's export quotas by the World Trade Organization.

In response, the U.S. Department of Energy initiated Project REACT, short for "Rare Earth Alternatives in Critical Technologies" to specifically address the growing global shortage of rare-earth materials used in magnets.

Today, the U.S. is still 100% reliant on imports for neodymium and many other rare-earth elements.

Investing in Neodymium and Rare-Earth Metals

It's not so easy.

There are several large mining companies like BHP Billiton (NYSE: BBL) and Freeport-McMoRan (NYSE: FCX) that mine small amounts of rare earth elements. But there is no major miner with pure rare earth exposure. And because the rare-earth elements are always found naturally grouped together, there's no such thing as a pure neodymium mine.

Several junior exploration companies are seeking a big find. But no doubt many are simply trying to capitalize on the rare earth hype and have no assets of any real value. Most are flat out scams. That is why resource investor, Keith Kohl, spent his entire quarantine time pouring over data to find the best companies sitting in a prime position to develop rare-earth deposits in the U.S.

Kohl says, “We’re already far behind in this game. But that’s about to change for us. Demand for rare-earth metals is surging, but you don’t need to take my word for it, just take a look around you.” He recently released a complete report outlining his prediction for the market and how it could lead to the next big natural resource war.

I urge you to check that out today. You can see his complete report here.

Until next time,
Luke Burgess Signature
Luke Burgess

As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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