By Eric Onstad
LONDON (Reuters) -Four decades ago, a rare earth processing plant on France’s Atlantic coast was one of the largest in the world, producing materials used to make color televisions, arc lamps and camera lenses. The current owner Solvay (EBR:) is rushing to return the La Rochelle plant to its former glory after years of reduced production, as Europe tries to boost production of the minerals fueling the green energy transition.
The plant’s 76-year history is a microcosm of the challenges Europe and the United States face as they try to reverse the mass migration of rare earths processing to China that took place about 25 years ago.
China became dominant in rare earths, a group of 17 minerals, by producing them at lower prices than the West, helped by government support, and often by ignoring environmental problems in a sector that can generate toxic waste.
In recent years, China has strengthened sustainability and halted polluting activities.
In the 1980s and 1990s, production at the La Rochelle plant set the benchmark for global rare earth prices. It now supplies 4,000 tonnes a year of separated rare earth oxides, a fraction of the 298,000 tonnes China pumped out last year. Moreover, Solvay’s modest production is focused on the kind of processed rare earth metals used for automotive catalysts and electronics, not the kind needed for permanent magnets used in electric vehicles (EVs) and wind power. Solvay says it will start doing that next year. “We at Solvay want to put rare earth metals for permanent magnets back on the map in Europe,” said An Nuyttens, president of Solvay’s rare earth metals division. “It is not easy, it will happen step by step, because the chain from mining to the production of magnets must be built up.” Ultimately, the 160-year-old chemical group aims to meet 20% to 30% of the demand for individual rare earth metals for magnet production in Europe, but Nuyttens said meeting that target may not be possible until after 2030, without to give a date.
Under a new EU law that came into force in May, the bloc has set ambitious 2030 targets for domestic production of crucial minerals needed for the green transition – 10% of annual needs mined, 25% recycled and 40% will be processed domestically by the end of 2030. the century. The bloc has focused on rare earths as one of the top critical minerals because of their use in permanent magnets that power motors in electric vehicles and wind power. Demand in the EU is expected to grow sixfold in the decade to 2030 and sevenfold by 2050.
However, the EU will struggle to meet most rare earth targets, according to production forecasts collected by Reuters and interviews with more than a dozen industry executives, consultants, EU-funded officials, industry groups and investors.
Missing targets in the Critical Raw Material Act (CRMA) could impact the bloc’s zero-carbon targets while opening the prospect of further dependence on China amid heightened geopolitical tensions with the West, analysts say. China is responsible for 98% of the EU’s imports of rare earth permanent magnets.
European Commission spokesperson Johanna Bernsel said they could not confirm Reuters’ findings but said the bloc would do its best to promote projects that help achieve the CRMA’s objectives.
“Projects in Europe will benefit from a streamlined permitting process, as well as coordinated support for access to risk-mitigating financing instruments and matchmaking with downstream users,” Bernsel said.
WINDOW CLOSE QUICKLY
There are three main steps in the rare earth supply chain before permanent magnets can be produced: mining, element separation and metal/alloy production (the latter two are both covered by the processing objective). Reuters collected production forecasts from companies and compared them to a demand forecast in a report by two EU-funded agencies to assess how the bloc is doing against its targets.
According to Reuters analysis, the EU will have only low production from rare earth mines in 2030; and there is also only one project in the metals and alloys sector, with a low margin.
However, the bloc is likely to achieve one goal in its most advanced area: separation, meeting 45% of needs by 2030.
The final stage of the supply chain – producing magnets from the metals – is not covered by the objectives of the new law as it is a finished product, but EU production is expected to reach only 22% of the total by 2030 meet expected demand, the report said. Reuters analysis.
Barriers to boosting rare earth production in the EU include public opposition to new mines, cautious support from European industry benefiting from cheap Chinese imports, limited financing, uncertain demand as electric vehicle sales growth falters and weak prices for the metals.
“The window between now and 2030 will close very quickly considering how long it will take to get some of these projects and processing facilities off the ground,” said Ryan Castilloux of critical minerals consultancy Adamas Intelligence.
Not including magnets in the CRMA targets is a “blind spot” and sets the law up to generate “false positive” results, he added.
The EU spokesperson did not comment directly on that criticism, but noted that CRMA includes several measures to increase recycling.
MINING ON ICE
The European continent has rich deposits of rare earth metals, but they are currently not being extracted. This is unlikely to change in the short term as some projects have stalled due to public opposition. The only likely output in the EU in 2030 is the reprocessing of waste from Sweden’s LKAB iron ore mines, which would contribute about 1% of the EU’s demand for oxides needed for magnets, based on Reuters analysis.
South Sweden’s Norra Karr project, which could meet much of the region’s demand, has been held up in the government permitting process for a decade and has also faced opposition from environmentalists who say it would destroy drinking water can pollute.
An executive at the project’s owner, Leading Edge Materials, said a new mining lease application is being prepared for a redesigned project, but did not provide a timeline for starting production.
The company plans to apply to declare the project strategic under the CRMA, which in theory would allow for expedited permitting within 27 months.
Sweden is examining what changes are needed to comply with the CRMA, Deputy Prime Minister Ebba Busch told Reuters.
“Sweden is uniquely positioned to lead this initiative… there is also a study underway to see how we can streamline the environmental permitting process.” Another rare earth mining project, Sokli in Finland, also wants to be called a strategic project but still needs to undergo an environmental impact assessment and permits. “It is not realistic to put it into operation before 2030,” said Matti Hietanen, CEO of the project’s owner, state-owned Finnish Minerals Group. Non-EU Norway could contribute 10% of the bloc’s demand by 2031, according to private company Rare Earths Norway, which said this month it has Europe’s largest deposit of rare earths. A decline in rare earth prices also dampens the prospects for new mining projects. “At current price levels, most mines are simply not profitable, so there needs to be support from governments and car manufacturers,” says Daan De Jonge of consultancy Benchmark Mineral Intelligence in London. EU companies are also preparing to take advantage of the huge potential for recycling to supply crucial rare earths, but it will take some time before there is enough supply of old electric vehicles and wind turbines to process. INTEGRATING THE SUPPLY CHAIN Other industry executives echoed Solvay’s uncertainty about ramping up production by 2030, with several telling Reuters they could not commit to starting or increasing production by then. Some of the wariness is due to sales demand for electric cars having cooled in recent months after rising dramatically for several years as consumers wait for more affordable models to hit the market. European EV sales fell 9% in May. Another challenge for Europe is competing with cheaper imports from China, which has a highly integrated rare earth supply chain, including state-owned enterprises, from mining to finished magnets.
Some of Europe’s top rare earth companies have long had operations in China or have joint ventures with companies there, using that expertise to boost their new EU ventures. One of these is Neo Performance Materials. It has a rare earth separation plant in Estonia and operations in other countries, including China. The company is also building a permanent magnet factory in Estonia, which will launch production next year and increase to 2,000 tons of annual capacity over the next two to three years, enough magnets to power about 1.5 million electric vehicles.
The expansion will depend on whether customers support the goals of the Critical Raw Material Act.
“If they are going to source 40% of their processed material here, we will absolutely support that demand with production capabilities in Europe,” said CEO Rahim Suleman. Although competition with China is tough, Neo estimates it can produce magnets that will cost about $20 to $50 more per vehicle than imported magnets from China. The permanent magnets in hybrid and EV engines cost more than $300 per vehicle or up to half the cost of the engine, analysts say.
GKN (LON:) Powder Metallurgy has launched small-scale production of permanent magnets at a factory in Germany and is preparing to build a larger commercial facility based on demand. Magneti Ljubljana in Slovenia, founded in 1951, aims to expand production, but this depends on whether customers are willing to buy products that are more expensive than Chinese imports to diversify their offering and in some cases improve sustainability enlarge. “I have been working in this factory since 1986 and during that time 27 factories in Europe stopped producing magnets because of the price,” said General Manager Albert Erman.
