Written by Eric Onstad
LONDON (Reuters) – Four decades ago, a rare earths processing plant on France’s Atlantic coast was one of the world’s largest, producing materials used to make colour televisions, arc lights and camera lenses. Its current owner Solvay (EBR:) is racing against time to restore its La Rochelle plant to its former glory after years of declining production as Europe seeks to boost production of minerals that fuel the transition to green energy.
The plant’s 76-year history is a microcosm of the challenges Europe and the United States face as they seek to reverse the exodus of rare earth processing to China that occurred about 25 years ago.
China has become dominant in rare earths, a group of 17 minerals, by producing them at lower prices than the West, with the help of government subsidies, and often ignoring environmental concerns in a sector that can produce toxic waste.
In recent years, China has promoted sustainability and shut down pollution operations.
In the 1980s and 1990s, the plant in La Rochelle set the benchmark for global rare earth prices. It now produces 4,000 metric tons a year of isolated rare earth oxides, a fraction of the 298,000 tons China pumped out last year. What’s more, Solvay’s modest output is focused on the type of processed rare earths used in catalysts for cars and electronics, not the type needed for permanent magnets used in electric vehicles and wind power. Solvay says it will start producing them by next year. “We at Solvay want to put rare earths for permanent magnets back on the map in Europe,” said Anne Nuytens, head of the Solvay division that produces rare earth products. “It’s not easy, it’s going to be step by step, as the chain from mining to magnet production has to be built.” Ultimately, the 160-year-old chemicals group aims to supply 20% to 30% of Europe’s demand for rare earth elements separated for magnet production, but Newtens said that goal may not be possible until after 2030, without specifying a date.
Under a new EU law that came into force in May, the bloc has set ambitious 2030 targets for domestic production of critical minerals needed for the green transition, with 10% of annual needs mined, 25% recycled and 40% processed domestically by the end of 2019. The decade. The bloc has focused on rare earths as one of the most important minerals due to their use in permanent magnets that power electric vehicle motors and wind power. Demand in the EU is expected to rise six-fold in the decade to 2030 and seven-fold by 2050.
However, the EU will struggle to meet most targets in rare earths, according to production forecasts compiled by Reuters and interviews with more than a dozen EU-funded executives, consultants and officials, industry groups and investors.
Analysts say failure to meet targets set in the Critical Raw Materials Act could impact the EU’s zero carbon targets, while opening the door to greater reliance on China amid escalating geopolitical tensions with the West. China represents 98% of the European Union’s imports of rare earths.
European Commission spokeswoman Johanna Bernsel said they could not confirm Reuters’ findings, but said the bloc would do everything it could to promote projects that help achieve the goals of the CRMA.
“Projects in Europe will benefit from a simplified permitting process, as well as coordinated support to access financing instruments to de-risk and match with end-users,” Bernsel said.
Close the window quickly
There are three main steps in the rare earth supply chain before a permanent magnet can be produced – mining, element separation, and metal/alloy production (the last two steps fall within the processing target). Reuters collected production forecasts from companies and compared them with demand forecasts in a report issued by two European Union-funded bodies to assess how the bloc is performing compared to its goals.
According to a Reuters analysis, the European Union is set to have only minimal production from rare earth mines by 2030; Similarly, there is only one project in the metals and alloys sector, which is low margin.
However, the union is likely to achieve one goal in the most developed region, namely secession, and produce 45% of needs by 2030.
The final stage of the supply chain – the production of magnets from metals – is not covered by the targets in the new law because it is a final product, but EU production is expected to meet only 22% of projected demand by 2030, according to an EU Reuters analysis.
Obstacles to boosting rare earth production in the EU include public opposition to new mines, cautious support from European industry that benefits from cheap Chinese imports, limited financing, and uncertain demand as growth in electric vehicle sales falters and weak metal prices.
“The period between now and 2030 will close very quickly in terms of how long it will take to get some of these projects and processing facilities up and running,” said Ryan Castillo of Adamas Intelligence, a consultancy specializing in critical minerals.
He added that failing to include magnets in CRMA targets is a “blind spot” and creates a law to generate “false positive” results.
An EU spokesman did not comment directly on the criticism, but noted that the CRMA includes several measures to increase recycling.
Ice mining
The European continent has rich deposits of rare minerals, but they are not currently mined. This is unlikely to change in the near term, with some projects stalled due to public opposition. The only potential EU output by 2030 is the reprocessing of waste from LKAB iron ore mines in Sweden, which will contribute about 1% of the EU’s demand for oxides needed for magnets, based on a Reuters analysis.
The Nora Kar project in southern Sweden, which could meet a large portion of the region’s demand, has been stalled for 10 years in the government permitting process, and there has also been opposition from environmentalists who say it could contaminate drinking water.
An executive at Leading Edge Materials, which owns the project, said that the company is currently studying a new request to lease a mine for a redesigned project, but he did not specify a timetable for the start of production. The Swedish government did not immediately respond to a Reuters request for comment.
The company plans to apply for a strategic declaration of the project under the CRMA, which in theory would enable fast-track clearance within 27 months. Another rare earth mining project, the Sokli project in Finland, also aims to be called a strategic project, but still has to undergo an environmental impact assessment and licensing. “It is not realistic to put it into operation before 2030,” said Matti Hietanen, CEO of state-owned Finnish Metals Group, which owns the project. Non-EU member Norway could contribute 10% of the bloc’s demand by 2031, according to private Norwegian company Rare Earths, which said this month it has the largest rare earth repository in Europe. Low rare earth prices also weaken the prospects for new mining projects. “At current price levels, most mines are not profitable, so there needs to be support from governments and car manufacturers,” said Dan de Jong of London consultancy Benchmark Mineral Intelligence. EU companies are also poised to tap the huge potential of recycling to supply important rare earth elements, but it will take time before there is enough supply of old electric vehicles and wind turbines to process them. Supply chain consolidation Other industry executives echoed the uncertainty expressed by Solvay about ramping up production by 2030, with several telling Reuters they could not commit to launching or increasing production by then. Some caution is due to demand for refrigerated electric vehicle sales in recent months after rising sharply for several years, as consumers wait for more affordable models to appear on the market. Electric vehicle sales in Europe fell by 9% in May. Another challenge facing Europe is competing with cheaper imports from China, which has a highly integrated supply chain for rare earths, including state-owned enterprises from mining to finished magnets.
Some of the major European companies involved in rare earths have long had operations in China or joint ventures with companies there, and are using this experience to help promote their new projects in the EU. One of these companies is Neo Performance Materials. It has a rare earth separation plant in Estonia as well as operations in other countries including China. It is also building a permanent magnet factory in Estonia, which is scheduled to begin production next year and increase its annual capacity to 2,000 tons over the next two to three years, enough magnets to power about 1.5 million electric cars.
The expansion will depend on whether customers support the goals of the Biomaterials Act.
“If they are going to buy 40% of the material processed here, we will certainly support that demand with production capacity in Europe,” said Rahim Sulaiman, the company’s chief executive. While competition with China is tough, NIO estimates it can produce magnets that cost about $50 more per vehicle than magnets imported from China. Analysts say permanent magnets in hybrid and electric vehicle motors cost more than $300 per vehicle, or up to half the cost of a motor.
Powder metallurgy company GKN (LON:) 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 customers agreeing to buy more expensive products from Chinese imports to diversify their supplies and boost sustainability in some cases. “I have been working at this factory since 1986, and during that period, 27 factories in Europe closed magnet production because of the price,” said Albert Ermann, the company’s general manager.