POLA & rare earth metals for their use of Neodymium permanent magnet from China. A few things:
1. I think this outlying worry that China will cut quotas is why POLA is down in price as there is probably some individual investor/s worried that they will be set back in their business. I think it's overblown. China cut the export of rare metals in 2010 to approx 1/2 of what they were they year before. It was for the raw metal, not for finished products. According to one article I read, there was only 1 company on a cc call that even brought up the rare metal quota drop as even a concern.
2. POLA obviously was around in 2010 and so has dealt with this before. They don't buy raw rare earth metals, but finished magnets.
3. From article this week that detailed it vs just hyped the whole conversation like most of the media...........
"Last year the United States imported only about 4,100 tonnes of China’s production of the rare earths, or around 3.5%. Most of the rare earth materials used in the United States come in as finished goods, largely because China pressured Japanese and U.S. manufacturers of products using rare earths to build factories in China during the last quota cut in 2010.
The story is a bit different on the finished product side. Finished magnets, like those made in the Jiangxi factory President Xi visited, are also by U.S. manufacturers of automobiles and home appliances, and U.S. production capacity for these magnets amounts to about 500 tonnes a year.
The current price to import finished magnet materials from China is about $43,000 a tonne. If China were to cut off exports to U.S. customers, those customers would have to buy the materials from Japan at double the price, according to the Bank of America analysts."
----This would be worse case scenario. POLA would have to probably pay 2x the cost for their magnets they use. In the bigger scheme of things that's not such a big deal. They will easily save far more on the tariff's being dropped for aluminum and steel plus money saved going forward on labor efficiency.
----I would also assume within that $7.2M they have in "raw materials" inventory, they have a healthy supply of magnets.
---of course this all assumes that China even does anything vs just saber rattle. The risk they have if they do limit quotas is that they shoot themselves in the foot long term as the world then develops their own sources. Rare earth metals aren't actually rare, it's just that China processes them cheaper than anywhere else and so no one else has bothered to do it themselves anymore.
This also assumes that China puts some kind of restriction on exporting "finished goods" using rare earth metals. That rather hurts their own manufacturers.
