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Neodymium Costs Throttle Pro Audio

Despite the archaic name, rare earth elements are fairly common; just look at the ubiquity of Neodymium (Nd), used throughout modern pro audio equipment.

Despite the archaic name, rare earth elements are fairly common; just look at the ubiquity of Neodymium (Nd), used throughout modern pro audio equipment. While Nd isn’t rare, however, it is expensive, with a price tag that’s gone out of control in recent years—enough so that the pro audio industry is having second thoughts about its use.

In the audio world, you usually hear about the element in terms of Neodymium magnets, which are made from an alloy of neodymium, iron and boron. “Neodymium magnets are the strongest class of permanent magnets that can be made,” said Jason Cambra, COO of Fishman Transducers. “Their maximum energy product is on the order of 10 times that of their ferrite or ceramic counterparts. Because of this, significantly smaller, more compact and lighter weight designs and implementations are possible. In many cases, certain products would simply not exist without employing a neodymium solution.”

While they can be found in everything from microphones to headphones to guitar pickups, Nd magnets have had the most visible impact in loudspeaker designs, ever since Electro-Voice pioneered their use with its large-format N/DYM-1 compression driver, introduced in 1988. Since then, the magnets have become a favorite of many designers thanks to their smaller weight and size. “More components can be packed into less space with it,” explained Kenton Forsythe, EAW founder and senior vice president of engineering. “This can be a very significant advantage in system design. Weight savings are at least 50 percent over ceramic structures, which can be a very important figure in portable product.”

Another important figure, however, is Neodymium’s cost, which has exploded. “Neodymium magnets began a relatively reasonable and steady increase in January of 2009,” began Cobi Stein, marketing director at Eminence Speaker. “Those increases gained significant momentum in 2010. In March of 2011—and virtually overnight—the cost of many of our neodymium magnets increased over 100 percent from what they were just days before. Now, we have some neodymium magnets that have increased as much as 300 percent since January 1, 2011.”

China produces 97 percent of all Nd in the world, as it has for some time, due to lower production costs and less stringent environmental protection laws. In recent times, however, the Chinese government has curbed its rare earth exports (more than 30 percent in 2010 alone), and in February, outlined a five-year plan to increase state oversight of rare earths, raise environmental standards, crackdown on smuggling, stop illegal mining and more.

Additionally, in April, China imposed a severe new tax on rare earth mineral producers (old tax: between 8-46¢ a ton; new tax: $9.15 a ton), while also announcing it was pruning back their export by up to 35 percent in the first half of this year. Next up, China’s Ministry of Environmental Protection has laid out new, tougher rules on emission limits for producing rare earths that will take effect in October—a move expected to drive prices up and push production down even further.

Pro audio hardly has the Neodymium market to itself, however; Nd is used in everything from jet engines and cell phones, to hybrid cars and MRI machines. In testimony before a Congressional committee earlier this month, the U.S. Geological Survey predicted global demand for the minerals will increase at a rate of 8 percent a year. As Bill Gelow of Electro-Voice pointed out, “Windpowered generators require Nd, as do electric motors in vehicles, and the audio industry is not a high-volume user in comparison to these markets.”

What this means for pro audio varies from company to company, but suffice it to say that this is a touchy subject; more than one manufacturer declined to be interviewed for this story, likely because of what Nd price volatility means for customers down the line. “This has a notable impact on the cost and therefore also the price of some of our products— specifically on those which use more and larger neodymium magnets,” said Alex Tatini, owner of Italian slim-line loudspeaker manufacturer, K-array. “It’s fair to say that it’s a big factor.”

Eminence’s Stein elaborated the situation, explaining, “If our costs double for a smaller component like a dust cap or lead wire, we most likely could and would absorb that. A magnet is already one of the most expensive components of a loudspeaker, and when you have a cost that doubles overnight, there’s no other choice but to re-price…Fortunately, we were able to shelter our customers from the increases in 2010, and from January 2011 until the first of April.”

Loudspeaker manufacturers aren’t the only ones affected, however. Neodymium magnets allow microphones to have a much higher output level without making their magnets larger, pointed out Ron Thompson, vice president of operations for Shure. “Fortunately, microphones don’t require much of it,” he added, noting that Nd’s price explosion “…translates into a cost increase of less than a dollar per microphone, which isn’t enough to force a price increase.”

So where does Neodymium go from here? Many analysts see China’s legislative price manipulations as an overt attempt by its government to break the world’s reliance on Chinese rare earths, thus keeping the materials at home for domestic industries’ use instead. As might be expected, these maneuvers have far-reaching economic and political implications around the globe (for one thing, consider that the U.S. military is one of the largest consumers of Nd magnets in America).

Now the charge is on to develop, or in some cases rekindle, Neodymium production around the globe. “The original rare earth mine in California has been restarted,” pointed out D.E. Carlson of Electro-Voice, “and supplies in Canada and South America can also be mined once the economics are attractive.”

Indeed, that 55-acre mine in California— Mountain Pass, about an hour Southwest of Las Vegas—is being brought back to life in a hurry after being shut down in 1998 thanks to a perfect storm of cheap Chinese competitors and a string of radioactive wastewater leaks (most rare earth deposits contain Thorium). Molycorp, which bought the mine in 2000, has regulatory permission to drop the 500-foot-deep pit by another 300 feet over the next three decades—an effort it estimates could provide more than 10 percent of the world’s supply of rare earths per year.

Getting mines here and abroad online, however, will take time and while larger Nd consumers like auto companies can wait it out, staving off some effects of high prices by buying in bulk, smaller industries—particularly those that have lots of entrepreneurs, like pro audio—may have to explore other directions.

Admittedly, most loudspeaker companies aren’t interested in dropping Nd from their recipe any time soon. “While prices for raw materials may fluctuate, we take a longterm view in our material sourcing strategy,” said Helen Meyer, Meyer Sound’s executive vice president. “Choosing raw materials carefully helps us ensure each product we ship today performs as reliably and has the same sonic signature as the same product we shipped last year.”

Many, like L-Acoustics’ marketing director Stéphane Ecalle, see using alternatives to Neodymium as “a last-resort solution,” to be used only if sourcing or pricing go completely off the deep end.

Such dogmatic views are unsurprising, especially when you consider the countless hours and dollars put into R&D. The views aren’t unanimous though, as some manufacturers are looking into options.

“We are working closely with our suppliers to develop alternate magnet structures that do not require rare earth materials; this, however, will take some time to implement,” said EAW’s Forsythe. “We also are restricting the use of neodymium parts to applications where it really is needed, as opposed to using it merely for appearances’ sake. Ceramic structure can produce as much energy as neodymium, in most instances. One then has to decide if the cost advantage of ‘conventional’ ceramic structure overwhelms the size and weight advantage of the neodymium sufficiently to make it preferable to the user, and these are options we will be weighing.”

No matter what direction Neodymium prices—and pro audio manufacturers— head in, some things will remain the same. “With the significant weight savings and performance advantages,” said Eminence’s Stein, “we believe there will always be a demand for neo—but ultimately, that will be up to the consumers in our markets to decide.