 Hi, this is Jack Lipton and Critical Materials Corner, and today I'm going to speak with Ed Richardson, the president of Thomas & Skinner, a company that's been making rare earth permanent magnets in the past, and permanent magnets in general for over a century. Ed, can you tell us something about Thomas & Skinner, a brief history of your company? Sure. Well, thanks for having me on, Jack. It's great to talk to you, as always. Thomas & Skinner has been around since 1901. We were started by a professor at Purdue University around the turn of the century, around 1901. If you think about it, electricity was becoming available, but there weren't a lot of devices that could use electricity. So the research and development that was happening at the universities was around magnetic materials. Magnetic materials are often the bridge between electricity as a power source and whatever work you're trying to do. So the professor came up with some different materials, started manufacturing them, and created a magnet company. Over the years, we have evolved into making different types of magnetic materials. We make the permanent magnet alnico, but we've also made rare earth magnets as you alluded to. We've made Sumerian cobalt. We've made NEO. So we've seen a little bit of everything during the 120 years. When your company first made rare earth permanent magnets? Yeah. So in the late 80s, there were a lot of companies that jumped into space in the rare earth space, so making Sumerian cobalt, so making the center of NEO, Demi, and Sumitomo had developed, was one of the companies that developed center NEO, but they weren't enforcing their patents, and then after a while they came around and said, hey, if you're going to do this, you got to pay us. And so most companies jumped out. There were others that did get a license from Sumitomo, but over the course of time, then in North America at least, those companies went out of business. Now, when did you stop making rare earth permanent magnets at Thomas and Skinner? Well, probably around 1992, 1993. And why was that? Well, we wanted to focus on alnico, NEO. We didn't want to buy a license, and it was becoming very competitive. The Chinese were coming in. They had all of the raw materials, so it was becoming very competitive. And we just decided to step away from that, focus on things that we thought we could be more successful at. Now, I know the answer to my next question, but I want you to tell me. Why aren't, or is Thomas and Skinner looking to get back into the production of rare earth permanent magnets, with all of the emphasis now coming from the US federal government? You know, we have talked about it. The challenge, though, is with the patents. I talked about Sumitomo and the patents that they had filed. Similar to a pharmaceutical company, they filed a whole portfolio of patents. And there are hundreds, literally hundreds of patents on making Senator Neo Demi Maier Boron. And they are not, well, Sumitomo eventually sold their business to Hitachi Metals. So Hitachi now owns the Sumitomo patent portfolio. And Hitachi has chosen not to license anyone to make Senator Neo in North America. So if you were one of those original license holders, you still have that license. But in terms of when Hitachi has taken over, they're not licensing anyone new. So if we wanted to get back into it, we would need to get a license to produce from Hitachi. We had asked them for that, and they've declined. Just for your information, and I'm sure you know this, Hitachi Metals has been sold to the, and the purchaser is the Bain Corporation, the American company. And they've told me that they won't be able to close on that deal until sometime next year. And until then, they can't possibly be involved in any sub-licensing from the Hitachi Magnetic Subdivision and Hitachi Metals. So even if you wanted to and had all kinds of money, nothing would be happening next year. So which leads me to the real important question here, Ed. Do you think that there's going to be an American wearer of permanent magnet industry capable of supplying the needs of the North American market anytime soon or ever? No, no. First off, the Chinese aren't going away. So even if you were to get a license from Hitachi to produce, the Chinese are still formidable competitors. They own a huge advantage in terms of raw materials, labor costs, they're getting money from their government. So there's all kinds of reasons why the Chinese are still competitive in this space. And quite frankly, there are just some areas that most companies like us don't even want to go after. For instance, automotive. There's a lot of chatter about automotive, a lot of chatter about wind turbines. But I don't really see that as markets that are even open to a North American producer. Companies that buy magnets for those industries are looking for the lowest global price. And US producers will never be the lowest global price for producing center Neo. I've spoken to Europeans in this space as recently as this morning. And they think they're going to make wearer of permanent magnets there for their automotive industry. I find that hard to believe. I know they may want to do that. But again, how are they going to compete with automobile manufacturers that are getting their raw materials or magnets from China? Without companies, they can't. That's true. And I have to say that I pretty much agree with all of your conclusions. And you and I also know that people who actually know what they're talking about are shunned by those in elected office. So we just keep talking. I recall that you and I testified before a congressional committee years ago about this topic magnets. And that afterwards, our host told me that I was banned forever from justifying before Congress because I kept telling the truth, which is not what they wanted to hear. In any case, you have, you told me on a visit I made your plant about five years ago that you would not, you could build a Neo demium iron boron centered magnet plant again reconstruct the one you had. If I could guarantee you a supply of raw materials and metals now as a competitive prices and guaranteed you a customer who would allow you to sell at a profit. And so that sounds like a pretty straightforward answer to going into any business. And so you are currently a supplier to the defense department of magnets. Yes. And those are those are sourced from those are supposed to be sourced in the United States. Correct. Now, I'd like you to just tell me if I know what I'm talking about about a story I heard. It's clear that no really the United States is manufacturing Neo demium iron boron magnets yet and yet and we know that maybe 90 plus of such magnets are manufactured in China. Yet the people at a large defense manufacturing operation in Texas who make fighter planes tell me that well, we get our magnets from Japan and Israel. I've been told that the Israelis buy their magnets from Japan which buys their magnets from China and they they I don't know if this is a good term to use in case of Israel they baptize them as non Chinese. Now, isn't it isn't it sort of obvious that the defense department knows all these games and tricks? Yes. And they may be trying to be willfully ignorant. But, you know, there's a lot of key terms that that you have to nail down. Number one, you have to define what is produce mean. When we worked on the specialty metals clause, we narrowed the definition of produce down to meaning that you can melt the alloy. Right. If you can melt the alloy you are producing a metal. If you are melting center neo demium iron boron or at least the alloy for making that that is a rather involved process. And then you've got to turn that into a powder that you can that you can press. I can tell you that Israel does not have a magnet company within its borders. Japan does have the capability of making producing center neo demium iron boron and yet they get all their raw materials from China they are they are dependent on other companies or countries I should say. And they are they're tied very closely to China. And I can also tell you that Japan that the companies in Japan that produce center neo demium iron boron have been shifting their production more and more to China. And they have JVs with China they've been transferring technology and they've been transferring manufacturing plants in exchange for access to raw materials from China. So the amount that is actually produced in Japan is decreasing their reliance on China is increasing and I think it's a willful naivete to think that that Japan is somehow independent of China or that production in Japan is somehow not tainted by Chinese production. Japan is very, very dependent on China. And if you're if you're getting magnets from Japan those materials are coming from China. Those raw materials are coming from China. No, I think I I understand that completely. So the you're aware that the defense department is talking about they want the final aspect of any part they they need produced in the United States like they want they want they say they want rare permanent magnet motors assembled in the United States they want rare permanent magnets assembled into the components United States. Is there any I'm not aware of anybody in the United States currently that's manufacturing neo demium iron boron magnets and and I'm only aware of I believe your not really your competitor but electron energy in Pennsylvania which is making somerium cobalt magnets but I understand that they are currently but they buy their somerium from China obviously and so I don't see how they can say that they're independent either. They are they are making their own alloys though they are melting their own alloys and that's a key key step that they do have and so that does make them somewhat independent they also my understanding is they buy a lot of inventory and hold it to create a buffer. Somerium is one of those elements that's not in short supply it's actually an oversupply supply. So you don't hear much about somerium because there's a lot of it more than we typically use at least in magnet production. Are you aware of the fact that the largest Chinese magnet company has announced it's doubling its production of rare permanent magnets in the next two or three years? Yeah the expansion of capacity for making magnets has been going on for I would say the last 10 years in China they see it as a key industry for them in their future and so they have incentivized companies to invest and they have built a tremendous amount of capacity and continue to do so. My opinion and you can correct me if I'm wrong is that they're doing that because they see their domestic demand it's going up very high for cars domestic reproduction of energy you know by alternate means etc and so I don't think that they're doing this to promote an export market I think they're doing it to to ensure that their domestic consumption needs can be met. Absolutely absolutely but I think you could also say it sends a message to anyone who's thinking about getting into production that China is a willing and very aggressive investor in capacity and so any investment in capacity outside of China is going to be met with a lot of low price production but you're exactly right China is investing to to consume it themselves they are ahead of the rest of the world in terms of the use of electrical devices for instance electric bikes are much more common in China than they are here they're much more developed in their use and they're they're everywhere in China where they're just starting to be seen here in the United States and in Western developed countries and I and I think because of their advantages I think they are very eager to use electric motors in in devices so their trains are electric their bikes are electric I think they are very very anxious to create the electric automobile industry and they not only have demand but they have a pollution problem so they have consumers that want automobiles and they have a pollution problem that they want to get rid of so moving to electric vehicles would be very beneficial to them I so I think they're they're they're building to meet that that future demand one last question it it turns out the Chinese lately have been importing a lot of rare earth raw materials up to 40 of their needs and this is quite a dramatic change over the last decade or so do you think there's any chance that the Chinese will run short of raw materials no I think it's a very shrewd move by themselves to to get supplies from other countries number one it keeps other people from getting into the the production of of products using those raw materials but also it keeps them from using up all of theirs I don't think they're have a are facing a danger of running out they have a vast supply in the bowtow region but why use up all that you have when you can easily get what the rest of the world has and use theirs first Ed you must be right because I'm of the same opinion and great minds think alike listen I want to thank you very much for this conversation and we're going to keep in touch as the US rare earth permanent magnets industry progresses or doesn't so thank you very much thanks a lot appreciate your time thank you jack