By Eric Onstad and Hyunjoo Jin
LONDON/SEOUL (Reuters) -For years, Rahim Suleman had reached out repeatedly to automakers and other potential clients to market the rare earth magnets from the plant his company was building in Estonia, one of just a handful outside dominant producer China.
But after April 4, when Beijing imposed new restrictions on the super-strong magnets used in electric vehicles and wind turbines, Suleman retired his sales pitch. He didn't need it any more.
Ever since China's export controls tightened some rare earth exports to a trickle in the midst of a trade war with the U.S., causing chaos in supply chains and some auto plant shutdowns, “the phone is ringing off the hook”, said Suleman.
Companies starting new plants in Europe, the U.S. and Asia had previously reported difficult talks on deals that embedded the higher costs to make magnets outside China, which benefits from cheaper labour costs and economies of scale as well as government support via tax refunds.
But the crisis has led many customers to soften or drop objections about paying those premiums as they scramble to hammer out deals, according to a dozen industry participants including automakers, magnet makers, rare earth producers, consultants and government officials interviewed by Reuters.
While rare earths magnets from China are beginning to flow again, customers remain on edge about the threat of future shortages.
Suleman's company, Neo Performance Materials, launched output of permanent magnets at its Estonia plant in May. Now, he said, “everybody wants to talk about how (they can) satisfy their demand out of our facility”.
He said he has no worries about lining up enough customers who will pay a premium – $10 to $30 per kg, with EVs typically holding 2-4 kg of magnets per vehicle – over the price they usually pay for Chinese magnets.
Output at Neo's factory in Estonia is starting small, providing samples to its first customer, which Suleman declined to identify. German auto parts supplier Schaeffler told Reuters it is a customer of the plant, but declined to comment on how much it is paying.
In Korea, customers of NovaTech, which produces magnets in China, are prepared to pay 15% to 20% more for magnets made in Vietnam, a company source told Reuters, adding there was “a growing sense of crisis among customers”.
The company, which sells China-made magnets used in Samsung's phones and tablets, is investing at least 10 billion won ($7.39 million) in a plant in Vietnam launching early next year to make magnets using locally processed rare earths from a partner, the person and another company official told Reuters.
