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Multifaceted Material Substitution: The Case of NdFeB Magnets, 2010–2015

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Abstract

Substitution is an important response for material users when faced with disruption to the availability or price of an essential material. In economic terms, substitution refers to the ability of firms to alter their patterns of material use in response to exogenous market shocks. Substitution comes in different forms which vary from situation to situation. This paper uses expert opinion to identify the specific forms of substitution that occurred in permanent magnets, specifically neodymium–iron–boron magnets, following the significant increase in rare earth prices in 2010–2011. The paper provides a framework for understanding the multifaceted nature of substitution and assesses the relative importance of five different types of substitution. Technology-for-element, grade-for-grade, and system-for-system substitution appear to have been more important than element-for-element and magnet-for-magnet substitution. Cost pass-through and absorption were also important responses.

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Notes

  1. In economic analysis, substitutability is generally measured through elasticities, specifically the price elasticities of demand and supply and the elasticity of substitution between two inputs. Estimating elasticities empirically requires a substantial amount of historical data. Please see Refs. 4 and 5 for more information on elasticity estimation using econometric techniques.

  2. SmCo magnets have a maximum energy product ranging from about 16 MGOe to 33 MGOe (although the energy product of SmCo can be higher than NdFeB at high temperatures),12 while AlNiCo and ferrite (ceramic) magnets have maximum energy products up to about 5.4 MGOe and 3.4 MGOe,13 respectively.

  3. Element-for-element substitution also does not refer to substituting completely different elements to produce similar, but different, magnet types.

  4. While HRE diffusion allows for a lower HRE content by weight, it does necessitate an increase in the neodymium/praseodymium mix such that the total rare earth content of the magnet remains roughly the same. In economics, this is a different concept from a true improvement in technology, which implies the ability to use less total inputs for the same output.

  5. There is also a newer technology referred to as the dual alloy method in which one of the constituent alloys, containing dysprosium or terbium, is a lower melting alloy and permits conventional powder metallurgy production without extra manufacturing steps and the associated costs. This technology has patents applied for in 2014–2015 by Shin-Etsu.23

  6. In microeconomics, reversibility refers to the ability to move up and down the demand curve at will in response to price changes. If the new quantity demanded persists after prices revert back to their original state (that is, if demand is not reversible), then the original shift describes a shift in the demand curve, rather than a shift along the curve.

  7. In the dual alloy method, no extra manufacturing steps or costs are required, so manufacturers would likely not switch back to traditional techniques if using this method.

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Acknowledgements

We thank the numerous experts who consented to be interviewed. Without their comments, this research would not be possible. In addition, an anonymous reviewer provided valuable feedback on much of the technical discussion. This work is supported by the Critical Materials Institute, an Energy Innovation Hub funded by the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Advanced Manufacturing Office. The authors declare that they have no conflict of interest.

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Authors and Affiliations

  1. Division of Economics and Business, Colorado School of Mines, Golden, CO, USA

    Braeton J. Smith & Roderick G. Eggert

  2. Critical Materials Institute, Ames, IA, USA

    Braeton J. Smith & Roderick G. Eggert

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  1. Braeton J. Smith
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  2. Roderick G. Eggert
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Correspondence to Braeton J. Smith.

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Smith, B.J., Eggert, R.G. Multifaceted Material Substitution: The Case of NdFeB Magnets, 2010–2015. JOM 68, 1964–1971 (2016). https://doi.org/10.1007/s11837-016-1913-2

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  • DOI: https://doi.org/10.1007/s11837-016-1913-2

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