http://investorintel.com/technology-metals-intel/lifton-exporting-sushi-tokyo/
Japan’s Daido Steel rare earth magnet plant plans for the U.S.
Posted on August 27, 2016 by Jack Lifton
Recently in China I proposed to two long experienced rare earth traders that I would like to export separated magnet specific rare earths and metals from the USA to China. One young trader laughed at my suggestion, but the older one simply said “your materials” would have to be better quality than ours and price competitive.
A sharp eyed reader of InvestorIntel let us know yesterday that Japan’s Daido Steel is undertaking the construction of a high volume rare earth permanent magnet manufacturing plant in the USA to service the OEM automotive industry. I suspect that it is the just-in-time needs of one of the Japanese OEM automotive transplants that is the driver for this move, but nonetheless it is the first planned construction or operation of such a plant in the USA since Magnequench departed these shores in 2004. I think that it is a telltale sign of two things: 1. Daido Steel expects to be able to produce or obtain high purity separated NdPr oxide in North America competitively with supply from China (perhaps from Lynas or even perhaps from the Americas), and 2. Daido Steel expects to make for itself or obtain NdPr metal of REPM grade here in the USA. No global manufacturer would willingly put itself at the end of a 7,000 mile supply chain based on geographically unavailable (locally) raw materials for critical production parts.
Two more things are apparent: Japanese skilled labor and other overheads are climbing, and it seems that outsourcing manufacturing to East Asia is becoming too risky for the Japanese. Note that this is notwithstanding the vaunted robotics revolution in which Japan is clearly ahead of the USA.
The typical young sector analyst who has seen only one business cycle will liken making REPMs in the USA to exporting ice to Alaskans or exporting sushi to Tokyo. Those of us who have seen many, many business cycles can only note that the wheel is turning.
One way to look at this is to realize that the security of the supply of critical production parts on a just in time basis has forced Daido Steel to make this move. I wonder what the sourcing managers at the American and Italian owned “domestic” OEM automotive assemblers are planning to do when they can’t get REPM enabled parts from China. Does Daido Steel know something that General Motors doesn’t?
Did I mention that Daido Steels plans call for capital expenditure of USD$100,000,000 by 2026 with production to begin in 2019. Can you imagine that? Daido Steel has a plan that encompasses capital expenditure over 10 years! Can’t that company hear the doomsayers in the USA who talk about rare earth prices in the short term as the driver of (no) long term strategies? One might think that most sector analysts simply don’t know anything about the real world of mass production of consumer goods. Imagine that.
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