EDITOR: | August 27th, 2016 | 14 Comments

Japan’s Daido Steel rare earth magnet plant plans for the U.S.

| August 27, 2016 | 14 Comments

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.

Jack Lifton


Jack Lifton is the CEO for Jack Lifton, LLC and is a consultant, author, and lecturer on the market fundamentals of technology metals. Technology metals ... <Read more about Jack Lifton>

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  • Bill

    appears to be a smart geopolitical move by the Japanese

    also India after 12 long years have recommenced export of rare earths to Japan


    August 27, 2016 - 6:16 PM

  • Jack


    Thanks for catching the news from India. There are more people in India than in all of Africa. Those are the next markets for mass produced rare earth enabled consumer goods. I predict that India will become a manufacturing center rivaling China for rare earth enabled components. The game’s afoot.


    August 27, 2016 - 6:33 PM

  • Jeff Thompson

    At long last, America is remembering that you can’t “outsource” every skill your country has spent generations building knowledge in and then expect to retain that knowledge and experience just because you’ve “already done it” in the past. Continual practice is required. Possession is nine-tenths of the law, as much so for manufacturing skills as it is for the actual raw material sources themselves. Base metal mines, precious metal mines, rare earth metal mines, minor metal mines, separation plants (using both established and developmental techniques such as MRT and CIC/CIX), alloy manufacturers, finished goods manufacturers… they all matter, and relinquishing control of them is an error that always has to be reversed in the decades that follow.

    This is one small but important step to reintroduce manufacturing skills back into the U.S. labor force via an operation owned by our ally Japan. America cannot survive on computer programming skills alone. Software and the latest “ap” may be the icing on the cake, but they mean little without the foundation of the “cake” itself. Diversity of industries is key. The next step is development of more American-owned companies at all levels of the various industrial supply chains. A positive development, to be sure.

    August 27, 2016 - 7:18 PM

  • John Ormerod

    This is an intriguing development for the US magnet market…..Daido’s technology is significantly different to the standard powder metallurgical route. Do you have any idea where the plant will be located?

    August 27, 2016 - 8:07 PM

  • Jack Lifton


    I have no idea where the plant will be located, but I recall that Hitachi used to manufacture rare earth permanent magnets for the OEM automotive industry in a small town in Michigan, so as to be near the purchasing, production part approval, and R&D centers of the (former) Big Three. Those functions are still in Michigan along with similar ones for Toyota and Honda USA. I would guess that Daido is going to wind up in the Midwest. If I were a betting man I would say that Indiana would be my first choice. There are still a lot of workers there who make magnets and more who used to do it for Magnequench as well.


    August 27, 2016 - 8:30 PM

  • Ed Moore

    “it is the first planned construction or operation of such a plant in the USA since Magnequench departed these shores in 2004”

    Mr. Lifton appears to have overlooked the Hitachi plant in China Grove, which has been making sintered NdFeB magnets for the last few years.


    August 28, 2016 - 12:08 PM

  • Louis Pearson

    I wonder if there is a way to know where the Hitachi North Carolina plant sources its feed stock, and who its customers are? Lou

    August 28, 2016 - 1:00 PM

  • Jack Lifton

    Ed and Louis,

    The Hitachi “plant” in China Grove is a finish machining, assembly, and magnetization center. Rare earth magnet alloy made for/by Hitachi in China is sent to Malaysia where it is machined into the desired shapes. Those shaped pieces are sent to China Grove where they are put into subassemblies for ZDF, the German owned automotive transmission manufacturer, and then magnetized and sent to the nearby ZDF transmission plant where transmissions are assembled for US based or owned automotive manufacturers. I believe that when China Grove started some of the Mountain Pass ore was separated in Estonia and then sent to Japan from where it entered the Hitachi China Grove supply chain, so that the magnets finished there could be said to have “American content.”
    As far as I can tell Daido Steel intends vertical integration in its US plant(s). I do not know from where Daido will get rare earth mineral concentrates, but if they are from the USA, and if they are separated in the USA then the Daido plant(s) will be the first new integrated manufacturing plant(s) in the USA since the 20th century.

    I note also that my understanding of the Berry amendment is that no matter what the source of the mineral concentrates for the Daido plant(s) the magnets will qualify as “domestically produced” if the rest of the supply chain is domestic. Thus Daido’s magnets would HAVE TO BE USED by the DoD if they met specifications and were reasonably competitive in price. Although the DoD’s market share of rare earth permanent magnets is small it is nonetheless significant.


    August 28, 2016 - 1:55 PM

  • Louis Pearson


    As always, thank you for the clarification. Lou

    August 28, 2016 - 2:57 PM

  • Bill

    It appears to me as if they are already lining up the supply for their new plant ….


    September 1, 2016 - 10:26 AM

  • Jack Lifton


    Could be, but If I were Oaktree I would look at MRT. The interest on the Molycorp debt would cover the construction of a 10,000 ton/annum MRT light rare earth separation plant at Mountain Pass. The scrap value of the existing SX monster might cover the entire cost of an equivalent MRT plant. And an MRT plant would be SO MUCH GREENER that such a change would be an environmental darling.

    September 1, 2016 - 10:37 AM

  • Bill


    perhaps that is exactly what is unfolding for Mountain Pass = MRT

    Also why aren’t heavy rare earth developers such as Northern Minerals lining up to use MRT ?

    Why are Northern Minerals throwing $50M to $60M on what now appears to be outdated technology to construct a 60,000 ton p.a. plant.

    What capacity MRT plant would $50M to $60M buy Northern Minerals.

    Jack can you speculate on the possible answers to these interesting questions

    September 1, 2016 - 11:22 AM

  • Joe o

    Since Jack L has numerous contacts in the industry and is involved in ucore I would imagine many calls or presentations have been happening
    Sometimes this stuff takes years, not months. If mrt is the goods then something positive should eventually transpire. Now get to work Jack, need ucore to double soon. Lol

    September 1, 2016 - 12:39 PM

  • HC

    I believe NTU would still need to produce a PLS as feedstock for MRT processing. The $50-60M pilot plant would simply produce the feedstock. MRT could then be used to seperate the feedstock into individual REO.

    September 3, 2016 - 8:32 AM

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