Rare earths: Hitachi Ltd. to sell Hitachi Metals including NdFeB magnet patent and production facilities
Hitachi Ltd. has announced its intention to sell the Hitachi Metals business unit, including the company’s Magnetic Materials segment which holds one of the two original patents to produce sintered NdFeB magnets, the other being held by Neo Materials (Magnequench). The business unit has been valued in excess of ¥700Bn (US$6.63Bn), though the final purchase price could exceed this. Whilst Hitachi Ltd. is the major shareholder, other minor shareholders are expected to sell their shares to any new majority owner.
Roskill view
Though the Magnetic Materials forms one of the smallest segments of the Hitachi Metals business unit, accounting for 13% of total revenue in 2019, its importance in the production of rare earth magnets is much greater. Hitachi Metals patents for NdFeB production represent IP licenced to a number of producers, with more than 600 individual patents being held by Hitachi Metals worldwide, including 100 within the USA for the production of sintered NdFeB magnets. Historically, Hitachi Metal has also aggressively defended its patents for NEOMAX® NdFeB production, reporting a successful legal challenge against several China-based manufacturers marketing products in the USA during January 2019. It is unclear if Hitachi Metals could sell off individual segments, or whether the business unit will remain as one entity after the sale, though the Magnet Materials segment may form an attractive target for any company looking to consolidate its position in the growing rare earth permanent magnet market.
Japanese NdFeB magnet production remains a leader in terms of product quality, though Chinese manufacturers have rapidly caught up with Japanese manufacturers since 2010. In addition, Chinese producers typically possess greater production capacity and are capable of operating at lower production costs because of supply chain efficiencies, along with lower energy and labour costs. As a major Japanese manufacturer, with multiple magnet facilities in the country, it is unclear how a potential change in ownership at Hitachi Metals may impact production capabilities.
Though no interested parties have been identified, some market participants suggest one candidate could be Beijing Zhong Ke San Huan Hi-Tech, with whom Hitachi Metals formed a JV to manufacture NdFeB magnets with in 2016. The potential for Hitachi’s NdFeB production patents and manufacturing capacity to be acquired by a Chinese based company may raise concerns for some end users, as both the USA and China have become increasingly defensive on the supply chain for rare earth products. High-quality NdFeB magnets are a focal point in the rare earth market, as a result of their use in electric vehicle motors, wind turbines and electronics, as well as in military equipment. Chinese control over patents in the USA could be seen as a potential risk factor to the USA’s development of a domestic rare earths supply chain.
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