Magnets aren’t US anymore

The permanent magnetic is a quiet, unobtrusive work horse in so many applications that it, like many things that are mechatronics related, is mind bogglingly (is that a word?) pervasive.  Magnets are the key material technology to enable high efficiency and power dense electric motors.  And electric motors are everywhere.

The particular magentic material that has enabled the CD, DVD, Hard Disk Drive, high performance speakers, magnetic resonance imaging and many other technical wonders, is Neodymium Iron Boron.  Based on General Motors research on magnet materials (in the 1980’s), scientists found a particular molecule of these materials which exhibited extremely high magnetic strength.  And, of course, one of the immediate benefits would be reducing the size of starter motors in cars by 30% and the weight of the motors by even more.  Great stuff!

But making the molecule wasn’t exactly a picnic.  Alloying was easy, but it turned out you had to cool the material down suddenly in order to get just the right molecule to form in a powder and then sinter and magnetize the result.  A whole new process had to be developed, called spin casting, to cool the material quickly enough to generate high quality raw material for NeFeB magnets.   I’m sure there are a lot more technical details, but I don’t remember much from my tour of the GM Magnequench facility in Indiana.  It’s been several years.

NeFeB alloy has been dramatically improved and as demand has increased, fortunately, the price has dropped from the extremely high levels during it’s introduction.  As prices have declined it is estimated that 16,571 tons of Neodymium were used in magnet making in 2009 and 24,635 tons will be used by the year 2014.  That’s an increase of 48% in five years.  That’s huge.

The reason for all the increase is the fact that NeFeB magnets make really efficient motors.  So the new generation of appliance motors and air conditioning compressort that include NeFeB magnetics to increase the flux of the rotor combined with electric and hybrid car motors are driving demand more more magnets.  And now some emerging technology in the wind power marketplace, direct drive generators, will require many tons of additional material.

But what about our friends at GM Magnequench?  They’re gone!  The great future, full of potential for a US manufacturing company, lost to the sale of the company and closing the manufacturing facility.  GM sold the company to New Materials Technology in Toronto which is owned by China.  But the new owners couldn’t run the US factory at a profit.  Even at $20/hour for labor.  All the manufacturing jobs, gone.

There is currently no NeFeB magnet manufacturing in the US.  Which is kind of crazy when you think of all the applications we have for the stuff.  Even worse is the fact that a lot of advanced military hardware is dependent upon the magnets for guidance motors on missiles and a host of other applications.  And according to one source China now owns 97% of the world’s Rare Earth Elements sources.    Which is why there are now hundreds of companies in China selling magnets.

On the positive side, this has lead to overall declining prices for these magnets.  But will that continue to be the case?  The Chinese government is expecting to decrease their exports of magnets by 34% next year.  This could spell trouble for many companies.

But there is hope. The USGS has reported that the Mountain Pass Mine in Southern California is one of the largest and richest deposits of Rare Earths, including Neodymium, in the world.  And Molycorp is ramping up to fill the gap with new mining and manufacturing capacity.  Go get ‘em guys! Free enterprise at work.

The Crisis of Leadership

I would like to take a slight detour from the generally technical and economic posts.  The underlying issue to many of the challenges that we face in energy and technology has to do with how we make decisions as individuals, companies and as a culture.

I submit that the current “energy crisis” is largely self inflicted.  Electric power utilities have not been permitted to build new capacity for 30 years.  Any surprise that we have shortages?  Most of the commentary has to do with environmental studies that prevent the permits to be authorized.

Gasoline prices? The same thing.  We have all the oil and gas we need, we just can’t get permission from the regulatory agencies to go after it.  And refineries are in the same situation.  The management of the oil and gas companies decided years ago that it would be cheaper to simply bring gasoline over from the Middle East instead of making it here.  Fine.  But that strategy can only be used temporarily, as we have found out.  Except now we can’t build any new capacity.

Nuclear energy has advanced substantially in the form of pebble bed reactors which are thermally stable even when the coolant is shut off and cannot go critical mass because the nuclear material is insulated in ceramic.  Wave reactors are being demonstrated whose cores make the nuclear fuel inert, no disposal problem.  But we’ve spent decades making atomic energy “unacceptable”.  So there it would seem unlikely that we’ll see and solutions without a major shift in the political system.

So who’s fault it is anyway?  I don’t know.  There’s enough blame to go around.

Is there any scenario where decision making doesn’t turn into a political process?  In a democracy, a group of people can vote on something, be in agreement and be factually incorrect.  If we all vote that there is no gravity, does it make any difference?  It doesn’t matter how much factual information is presented, if the group controlling the decision making process chooses to ignore it.

Similarly the automobile industry has chosen for many years not to make high mileage cars.  This has been going on for years and Americans have had enough.    It can be part of a decision making process that has been corrupted or a conscious decision to ignore the market information that exists.

So the mis-management of major corporations can follow a similar path.  If senior management chooses to ignore market data, or use it’s authority for personal gain, you can get some very ugly results.  Like Enrom amd others.  Is this a failure of Capitalism as the Michael Moore types would have us believe.  I don’t think so.

It’s a failure of human beings.  It’s an ethical failure in some cases.  And it’s also a failure of the decision making processes.  So many times we get caught in eliminating choices that we fail to apply the most important premise; that a solution has to be found.  We have to have more electricity, for example, so let’s explore a bunch of options and what their impact will be.  And let’s try to make the best decision that insures that the goal of increased electricity at the best cost.

This changes the outcome so that goals can be met instead of paralyzing us with inaction that stalls our economy and short  changes everyone.

Car Wars?

For seventy years what was good for Detroit was good for America.  The major auto makers could sell as many cars as they could make.  And Americans were enthusiastic about the freedom offered by relatively inexpensive personal transportation.  Since Henry Ford’s introduction of the mass produced Model T and John D. Rockefeller’s agreement to provide gasoline at cheap prices, the gasoline powered automobile has dominated the landscape. Great fortunes were made.  And lost.

The steam and electric cars of the early 20th century were swept away by the low cost gasoline powered Model T.  The true cost of technology in action.

Since the first oil embargo in the 1970’s (under the Carter administration) energy costs have been fluctuating.  And how have the automaker’s responded?  With the same vehicles they have been making for decades.  American car makers have had problems with low cost, high mileage cars for a long time.

As people have progressively become more environmentally aware, the by-products of combustion have become an attribute that people would like to change in large measure.  This could come about by increased efficiency or alternative technology.  In the last few years, all the hybrid vehicles sold in the US have been imports.  The current sales rate puts imported hybrids at 300,000 vehicles a year in the US.  That’s a lot of cars we didn’t build.

The Environmental Protection Agency has been trying to get American automakers to improve vehicle efficiency for 30 years or more.  The response from Detroit has always been reluctant.  Change will be costly and take a long time.  And even when mileage target agreements were made, they never seem to be met.

In most businesses, when you stop meeting the customer’s needs, you stop selling product.   That’s exactly what has happened.  American car buying has dropped from 13 million units/year to 8 million units a year.  Big change.  Regardless if you blame it on the car companies or economic conditions, or both.  And a lot of harmful consequences to the economy since cars consume more steel, glass, carpet and just about anything you can think of, than any other sector of the economy.

Foreign manufacturers have settled into the US market and established themselves taking a share of market away from Detroit.  I didn’t hear anyone calling for reorganization of the industry during the last two decades while Japan set up shop on our soil.

So it seems a little strange to have government, which doesn’t actually know how to produce anything, dictating how the automakers need to produce cars.  One aspect that concerns me about the current plan from Washington is that it is based on projections of sales volumes ‘returning to normal’.  At sales volumes of 12 to 13 million the current plan will restore the automakers to financial health.   Does anyone believe that the American car makers can sell that many cars per year any time soon?

Peak versus Continuous Power

Another aspect of applying electric motors to power mechanical systems is the relationship between peak power and continuous power.  In mechanical systems the forces required to start a load may have no relationship to the power required to keep the system running.  Further, the  ideal demand for mechanical power may occur at a speed that has no relationship to the electric motor speed.

AC motors operate at fixed speeds unless they are controlled by a frequency inverter.  So matching the electric motor to the demand for mechanical power requires some electrical sophistication.  The most important factor in most energy conservation applications for inverters and AC motors is creating the right control strategy to match the demand for power to the to electric motor.  (we’ve done some articles on this subject so I won’t repeat the comments here.

Interestingly, the same problem with continuous and intermittent ratings show up in a lot of situations.   In the alternative energy arena, many systems are specified based on the peak power available from the equipment.  Most of the photovoltaic systems being installed are flat panels which only reach maximum output for a couple of hours a day when the sun is perpendicular to the solar panels.  During the rest of the daylight hours the photovoltaic panels put out considerably less power.  So there’s a big “disconnect” between the cost of the technology and the value it produces.

Photovoltaic pricing is still very expensive.  Residential installations that can produce enough power to take your home off the grid currently cost about $35,000 including installation.  Most state programs and federal tax rebates will pay for about half the cost.  But even at $15 to $20 thousand dollars, it costs more than most people can afford.

In the wind energy arena, the same rating problem exists. Wind power systems are rated at their maximum output.  But that output can only be achieved a certain number of hours out of the year when the wind is blowing in the right speed range.  Not too fast, because it’s hard for the power conversion systems to function, and not too slow or the wind won’t turn the generator.

So these million dollar machines must harvest the wind enough hours to make a profit.  This means it’s all about “location, location, location”.  The game is to find a location where there is enough wind for enough hours to generate electricity and a profit.  And that’s not easy, and it’s not cheap.  Locations that are suitable, like Altamont Pass in California, are remote and hard to get to.  This make installation more expensive and losses from sending the electricity long distances, less efficient.

In general the difference in peak versus continuous rating wouldn’t bother me so much, but it’s systematic in the alternative energy community.  It suggests a bit of misrepresentation as if to create a greater perception of value, when in fact, the systems being built take 8 years before they break even.

We can do better.

World Freight Prices Collapse Amid Financial Crisis

Freight shipping prices for transporting dry raw materials collapsed in November, slammed by the global financial crisis, slowing economic growth and falling commodity prices, industry experts said. The Baltic Dry Index, an indicator of economic trends which tracks the cost of moving goods such as coal, iron ore and grain across the oceans, has slumped over the past five months.

The index hit a record high of 11,793 points in May but has since fallen back to earth, hitting just 815 points last week — the lowest level since the end of 1999.

Source: IndustryWeek

MAPI Predicts Woresening Manufacturing Conditions

“Industrial production increased 1.3 percent in October and manufacturing production rose 0.6 percent in October after both sectors fell 3.7 percent in September,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.  “ The October improvement is not anything to cheer about.  Hurricane Ike and the Boeing strike severely disrupted production in September and the resumption of oil and chemical production in October boosted production.  The Federal Reserve estimates that without the hurricane and strike, industrial production would have fallen 2/3 percent in both September and October and manufacturing production would have declined 1 percent each month. 

“Proof of deteriorating business conditions in the manufacturing sectors is the pervasiveness of the decline across the vast majority of manufacturing industries—16 major manufacturing industries declined and only four increased,” he added.  “The financial crisis hurts business financing of capital projects and the loss of jobs and wealth depress consumers’ willingness to spend.  Both business and consumers are deleveraging away from debt, and also lack confidence in the short term economic outlook.  Unfortunately, economic fears tend to become self-fulfilling.”

Source: MAPI

Credit Crisis Hampers Deal Activity in the Industrial Manufacturing

The pace of deals in the global industrial manufacturing industry has slowed significantly during the first three quarters of 2008, according to a report released by PricewaterhouseCoopers LLP.

The report found that the number of deals with a disclosed value of at least $50 million announced during the first three quarters of 2008 (126 deals), is not likely to match last year’s level (207 deals) but is on pace to approach the number of deals announced during 2006 (169 deals).

The majority of deals that took place so far this year in the industrial manufacturing sector involved industrial machinery targets (42%), which is consistent with previous years. Interest in electronic and electrical equipment targets accounted for 20% of deals while rubber and plastic products categories accounted for 15% through the third quarter of 2008. In addition, acquisitions of public and subsidiary entities led all deal targets over $50 million (68%) during the first three quarters of 2008 while deals for privately-owned targets continue to increase steadily over time, accounting for 30% of all targets in the first three quarters of the year, rising from 27% in 2007 and 23% in all of 2006.

Source: IndustryWeek

Study Finds Top Corporate Spenders on R&D Boosted Investments

U.S. companies spend more on R&D overseas than at home, but 40% of all corporate R&D dollars invested in the U.S. is spent by foreign headquartered companies; race to tap technical talent and new global markets exceeds the pursuit of lower labor costs as reason to conduct R&D offshore.

Booz & Company’s fourth annual analysis of the world’s 1,000 largest publicly traded corporate research and development spenders, released today, found that these corporations continue to invest aggressively in R&D — spending a total of US$492 billion on research and development in 2007, a 10% rise over the previous year, and well over the compound growth rate of 6.7% since 1999. The majority of these companies (91%) conducted their R&D activities in multiple countries beyond that in which they are headquartered.

The Booz & Company study found that the average global multi-national corporation spends just 45% of its total corporate R&D dollars in its home country, while the majority is invested in other countries in its global footprint to capitalize on specialized R&D skills, proximity to new markets and insights into local customers. As in previous years, there is no statistically significant evidence that a higher level of R&D spending relative to peers assures better results. However, companies that invested more than 60% of their R&D spending outside their home countries over the past three years appeared to enjoy superior performance in total shareholder return, operating margin, market cap growth and return on assets. Further, companies investing a higher percentage of R&D resources overseas than their percentage of sales overseas had three-year market cap growth fully 50% higher than those that invested at lower levels.

Source: Booz & Company

Manufacturing Technology Consumption Up 11.4% in 2008

September U.S. manufacturing technology consumption totaled $439.51 million, according to AMTDA, the American Machine Tool Distributors’ Association, and AMT – The Association For Manufacturing Technology. This total, as reported by companies participating in the USMTC program, was up 32.0% from August but down 1.4% from the total of $445.56 million reported for September 2007. With a year-to-date total of $3,462.69 million, 2008 is up 11.4% compared with 2007.

These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTC program.

“This solid September machine tool consumption report confirms the strong numbers from IMTS in September,” said Peter Borden, AMTDA President. “However, the financial uncertainty faced by the U.S. and G7 nations around the globe is signaling the approach of a tipping point towards the forecasted cyclical slowdown in the manufacturing sector. That said, we do expect 2008 to remain in the positive year-over-year growth column from 2007 due to continuing strength in energy-related and medical manufacturing.”

Souce: The Association For Manufacturing Technology

Japan’s Machinery Orders Post Biggest Drop in Decade

Japan’s core machinery orders plunged at the fastest pace in a decade in the third quarter as the economy teetered on the verge of recession, official data showed. The core private-sector orders, a leading indicator of corporate capital spending, tumbled 10.4% in the three months to September, the first quarterly drop in more than a year.

In the quarter to September, core orders by manufacturers fell 10.9%, while orders by non-manufacturers sank 12%. In September alone, orders rose a stronger-than-expected 5.5%, the first increase in four months, led by the electronics and chemicals sectors. The rise followed a 14.5% fall in August and was the strongest performance since May when the orders jumped 10.4%.

Source: Economic and Social Research Institute, Cabinet Office (Japan).

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