Exclusive – World’s Rare Magnet Companies Turn to Vietnam

Korean and Chinese magnet makers, including an Apple supplier, are planning to open factories in Vietnam, according to documents and people familiar with the plans, in an effort to shift supply away from China and hedge against tensions between China and the United States.

South Korea’s Star Group Industrial (SGI) and China’s Baotou INST Magnetic are said to be joining companies in industries as diverse as electronics and automobiles to shift assembly lines amid growing trade barriers.

China dominates in the magnetism and rare earth minerals that are produced. Magnets are important in the production of products such as electric cars, wind turbines, weapons and smartphones, making the sector strategically important. Despite this, only small efforts have been made to challenge China’s leadership.

However, neighboring Vietnam has untapped rare earth deposits that rival only China’s, as well as an emerging processing industry, giving the country the potential to become a bigger competitor, industry insiders said.

For example, Vietnam’s SGI project aims to produce 5,000 tons of high-performance neodymium (NdFeB) magnets per year by 2025, enough to power 2 million electric vehicles (EVs).

Yet Vietnam produces only 1% of the world’s magnets, according to Adamas Intelligence data cited in a US Department of Energy report, compared to China’s 92%.

In addition, some Chinese factories can produce 10 times more magnets than the SGI project, and China dominates the mining and processing of these minerals.

Still, Vietnam’s rise is significant.

The SGI plant at full capacity could produce about 3% of global production by 2022, as estimated by Project Blue, a critical materials consultancy. That’s equivalent to about half of the neodymium magnet imports into the U.S. last year, according to U.S. trade data.

In addition, U.S. officials have expressed interest in increasing Vietnam’s potential for rare earths during talks to improve bilateral relations this year, and South Korea signed an agreement with Vietnam in June to expand its supply chain of important minerals.

Magnet manufacturers are also attracted to Vietnam because of the low labor costs and market access they get through many free trade agreements. They also want to be closer to Vietnamese customers, such as automakers and electronics companies, who are increasingly worried about relying more on Chinese supplies as relations between Washington and Beijing deteriorate, industry insiders said.

Vietnam is the only country outside of China that knows all the stages of the magnet supply chain, from rare earth mining to downstream production, said a Vietnamese industry consultant, who was not authorized to speak to the media and therefore did not want to be. to be recognized.

The government is planning a major expansion of rare earth production by the end of this decade and increasing refining capacity, which the US energy department estimates is 3 percent of the global stock.

However, “Anyone trying to build a mine-to-magnet supply chain from scratch will face many challenges,” said Project Blue’s David Merriman.

DOUBLE PRODUCTION

SGI, which supplies magnets to Vietnam’s EV maker VinFast and Korea’s Hyundai Motor, told Reuters it is investing $80 million in a new factory in Vietnam, which will start production in 2024.

The plant would nearly double the current production of 3,000 tons a year from factories in South Korea and China.

SGI described the investment as part of “countermeasures” against potential Chinese trade restrictions.

“China’s policies on the control of raw materials and related rare earth technologies are being strengthened, leading to supply uncertainty,” SGI said.

The company said it produces most of its rare earths from China, but is exploring alternative sources in Vietnam and Australia and plans to develop a processing plant in Vietnam.

APPLE SUPPLIER

China’s INST is poised to begin work as early as next month at a leased factory in northern Vietnam after receiving local approval in June, two people familiar with the plans said.

INST, a major magnetics company specializing in circuit design, was added to Apple’s supplier list in 2021. The Vietnam expansion follows customer requests to disengage from China amid growing trade tensions, the two people said, declining to identify the customers. .

China’s Luxshare and Taiwan’s Foxconn are among Apple’s main suppliers that manufacture magnetic products in Vietnam, such as iPad laptops and MacBook laptops.

INST’s initial investment is a few million dollars, while the second phase may involve spending more to build its factory, said those people who refused to be named because they did not have permission to build the factory.

The INST did not respond to a request for comment from Reuters.

Similar demand from customers prompted another Chinese magnet maker, Magsound, to open a factory in Vietnam in the first half of next year, the two people said.

However, after receiving approval in June, Magsound withdrew its plans this month, filings showed. According to the two people, this followed the failure of negotiations with Luxshare regarding a supply agreement.

Luxshare and Magsound did not respond to requests for comment.

Among Vietnam’s magnet manufacturers, Japan’s Shin-Etsu Chemical expanded facilities this year after deciding in 2017 to double its annual capacity to 2,200 tons, according to a statement from the company and information on the consulting firm’s website. Obayashi.

Shin-Etsu and Obayashi did not respond to requests for comment.

In April, Australian Strategic Materials entered into an agreement with a Vietnamese refiner to supply rare earths for export to South Korea.

Source: SASATIMES NEWS