Do magnetic material enterprises benefit from the price rise cycle?

From the perspective of NdFeB material composition, the main components of NdFeB are praseodymium and neodymium (29% - 32.5%), iron (63.95% - 68.95%), boron (1.1-1.2%), etc. the cost of raw materials accounts for about 80%, of which rare earth elements (praseodymium and neodymium, dysprosium and Tomahawk) account for more than 90% of the cost of raw materials. The rising price of rare earth elements will have a direct impact on the raw material cost of NdFeB enterprises.

However, we found that if the price of Rare Earth continues to rise for more than one quarter, NdFeB will also enter a round of price rise cycle, and the profit will continue to improve. 1) in the upward cycle from 2010 to 2011, the price of rare earth will rise about one quarter ahead of that of NdFeB, the price of NdFeB will increase by nearly five times from 1075 to 628000 yuan / ton, and the highest profit per ton of NdFeB enterprises is close to 200000 yuan / ton;

2) In the rare earth upward cycle from June 2017 to September 2017, the price rise of NdFeB also lagged behind the price of rare earth by about 3 months. The price rise of NdFeB increased by about 30% from 135000 yuan to 175000 yuan / ton. Due to the short upward cycle of rare earth, the sustainability of the price rise of magnetic materials is also poor;

3) From October 2020 to now, the rare earth upward cycle is similar to the previous cycle. The price of NdFeB has increased by 111% from 1135 to 240000 yuan / ton. With the rise of the price of magnetic materials, the profit per ton of NdFeB enterprises has gradually expanded.

This is because the price of magnetic materials is generally determined according to the cost of rare earth raw materials and gross profit margin in the previous month, and the monthly or quarterly price adjustment mode is adopted, that is, the price change of neodymium iron and boron lags behind the price of rare earth for about a quarter, and benefiting from the influence of low-cost rare earth raw material inventory, the gross profit margin of magnetic materials enterprises will also be enlarged in the upward cycle of rare earth prices.