In Race to Regain Rare Earth Glory, Europe Falls Short on Mineral Goals – Reuters

By Eric Onstad

LONDON – Over 40 years ago, a rare earth processing facility located on France’s Atlantic coast was among the largest globally, producing materials essential for color televisions, arc lights, and camera lenses. Its current owner, Solvay, is working diligently to restore the La Rochelle plant to its former stature after a significant decline in output. This effort comes as Europe aims to enhance its production of rare earth minerals, critical for the transition to green energy.

The factory’s 76-year history encapsulates the difficulties both Europe and the United States encounter as they strive to reverse the extensive shift of rare earth processing to China that occurred approximately 25 years ago. China established its dominance in the rare earths sector—a group comprising 17 minerals—by offering lower production costs, benefiting from government support and often sidestepping environmental regulations associated with toxic waste.

In recent years, however, China has improved its sustainability practices and has shut down several polluting operations.

During the 1980s and 1990s, output from the La Rochelle facility set the standard for global rare earth prices. Currently, it supplies 4,000 metric tons of separated rare earth oxides annually, which is a mere fraction of the 298,000 tons produced by China last year. Moreover, Solvay’s limited output focuses on processed rare earths utilized in auto catalysts and electronics, as opposed to those needed for the permanent magnets essential for electric vehicles (EVs) and wind energy. Solvay has announced plans to commence production of the latter category by next year. An Nuyttens, president of Solvay’s rare earth division, emphasized the company’s intention to reinvigorate the presence of rare earths for permanent magnets in Europe. He acknowledged the challenges, noting that the entire supply chain—from mining to magnet production—needs to be established, with the company targeting to meet 20% to 30% of the demand for separated rare earths used in magnet production in Europe, though this may not materialize until after 2030.

Under a new EU law enacted in May, the bloc has outlined ambitious targets for domestic production of critical minerals essential for its green transition by 2030—10% of annual needs to be mined, 25% to be recycled, and 40% to be processed domestically. The EU has identified rare earths as one of the most vital minerals due to their crucial role in permanent magnets that power motors in EVs and wind energy systems. Demand within the EU is projected to increase sixfold by 2030 and sevenfold by 2050.

However, the EU may struggle to achieve these targets for rare earth production, according to forecasts gathered by industry analysts and interviews with over a dozen stakeholders, including executives, consultants, officials from EU-funded projects, industry groups, and investors.

Failing to meet the goals set out in the Critical Raw Material Act (CRMA) could jeopardize the EU’s net-zero carbon ambitions and heighten dependence on China amid growing geopolitical tensions, experts warn. Currently, China supplies 98% of the EU’s imports of rare earth permanent magnets.

An EU Commission spokesperson stated that while they could not confirm the findings, they are committed to promoting projects that align with the CRMA goals. The spokesperson also noted that European projects would benefit from streamlined permitting processes and coordinated support for accessing financing and partnerships with downstream users.

The challenges in the rare earth supply chain include mining, separating elements, and producing metals and alloys, all crucial before permanent magnets can be manufactured. According to the analysis, the EU is expected to exhibit minimal output from rare earth mines by 2030, with only one project underway in the metals and alloys sector, which generally operates on slim margins. Remarkably, the EU is projected to meet its target in the separation stage, producing 45% of its needs by 2030.

Despite the hurdles, including public opposition to new mines, reluctance from local industries benefiting from cheaper imports, uncertain demand due to recent declines in EV sales, and low metal prices, experts believe the timeline for ramping up European output is narrowing. Ryan Castilloux of Adamas Intelligence remarked that the window to initiate these projects is closing rapidly, highlighting the lengthy processes required to develop mining and processing facilities.

The absence of magnets from the CRMA targets has been labeled a “blind spot,” potentially yielding “false-positive” outcomes, Castilloux noted, while the EU spokesperson refrained from directly addressing this criticism but emphasized the law’s measures to promote recycling.

European countries possess significant rare earth deposits; however, there is currently no active mining in the region. The situation is unlikely to improve soon, with some projects stalling due to public opposition. The most possible source of oxides needed for magnets in the EU by 2030 appears to be the reprocessing of waste from LKAB’s iron ore mines in Sweden, contributing approximately 1% to the EU’s demand for rare earths.

The Norra Karr project in southern Sweden, which could significantly meet regional demand, has been mired in permitting delays and environmental opposition for a decade. The project’s owner, Leading Edge Materials, is pursuing a new application for a revised mining plan but has not shared a timeline for production commencement. Sweden is currently assessing what adjustments are necessary to align with the CRMA, according to Deputy Prime Minister Ebba Busch.

Another project, Sokli in Finland, is also aiming for strategic project status but must first undergo environmental reviews and permitting processes. Its CEO, Matti Hietanen, cautioned that commissioning the mine before 2030 is unrealistic. Meanwhile, non-EU-member Norway is anticipated to supply 10% of the bloc’s demand by 2031, with Rare Earths Norway reporting the largest rare earth deposit in Europe.

Falling rare earth prices are clouding the outlook for new mining initiatives. Daan De Jonge from Benchmark Mineral Intelligence stated that most mining ventures are unprofitable at current price levels and highlighted the necessity of government and automaker support.

European companies are also preparing to capitalize on the substantial recycling potential for critical rare earths, though supply will take time to ramp up as older EVs and wind turbines become available for processing.

Other industry leaders echoed Solvay’s concerns about the challenges of increasing production by the 2030 deadline. Several executives expressed caution about committing to production increases amidst recent slowdowns in EV sales, as consumers await more affordable options. European EV sales dropped by 9% in May.

The situation is further complicated by competition from cheaper imports from China, which maintains an integrated rare earth supply chain encompassing everything from mining to finished magnets. Many key European rare earth firms have longstanding operations or joint ventures in China, leveraging that experience to advance new projects in the EU.

One such firm, Neo Performance Materials, operates a rare earth separation plant in Estonia and is developing a permanent magnet factory in the country. This facility is expected to start output next year, eventually achieving an annual capacity of 2,000 tons—sufficient to supply about 1.5 million EVs. CEO Rahim Suleman indicated that expansion is contingent on customer support for the CRMA targets.

While challenging, Neo anticipates it can produce magnets at a marginally higher cost, ranging from $20 to $50 more per vehicle than imports from China, where permanent magnets in hybrid and EV motors can exceed $300 per vehicle.

GKN Powder Metallurgy has initiated limited permanent magnet production in Germany and is preparing to construct a larger facility based on demand. Magneti Ljubljana in Slovenia, established in 1951, is also looking to increase output but depends on customers willing to purchase higher-cost products compared to cheaper Chinese imports to enhance supply diversity and sustainability. Managing Director Albert Erman expressed concern, noting that 27 magnet production facilities across Europe closed due to pricing pressures during his tenure since 1986.