Representational image.

Four decades ago, a rare earth processing plant on France’s Atlantic coast was one of the largest in the world, churning out materials used to make colour televisions, arc lights and camera lenses. Its current owner Solvay is racing to return the plant at La Rochelle to its former glory after years of diminished output as Europe seeks to boost production of the minerals fuelling the green energy transition. The factory’s 76-year history is a microcosm of the challenges Europe and the United States face as they seek to reverse massive migration of rare earth processing to China that took place around 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 ignoring environmental concerns in a sector that can create toxic waste. In recent years, China has beefed up sustainability and closed polluting operations. In the 1980s and 1990s, output from the plant at La Rochelle set the benchmark for global rare earth prices. It now supplies 4,000 metric tons a year of separated rare earth oxides, a fraction of the 298,000 tons pumped out by China last year. Moreover, Solvay’s modest output is focused on the kind of processed rare earths used for auto catalysts and electronics, not the kind needed for permanent magnets used in electric vehicles (EVs) and wind energy. Solvay says it will start producing those by next year.

“We at Solvay want to put rare earths for permanent magnets back on the map in Europe,” said An Nuyttens, president of Solvay’s division that produces rare earth products. “It’s not an easy one, it’s going to be step by step, as the chain from mining up to magnets production needs to be built.” Eventually, the 160-year-old chemicals group aims to supply 20% to 30% of the separated rare earths demand for magnet production in Europe, but Nuyttens said meeting that target may not be possible until after 2030, giving no date. Under a new EU law that entered into force in May, the bloc has set ambitious 2030 targets for domestic production of critical minerals required for its green transition — 10% of annual needs mined, 25% recycled and 40% processed domestically by the end of the decade. The bloc has zeroed in on rare earths as one of the most important critical minerals due to their use in permanent magnets that power motors in EVs and wind energy. EU demand is forecast to soar sixfold in the decade to 2030 and sevenfold by 2050.

The EU will struggle, however, to meet most of the goals in rare earths, according to production forecasts gathered by Reuters and interviews with over a dozen industry executives, consultants, EU-funded officials, industry groups and investors. Missing targets in the Critical Raw Material Act (CRMA) may impact the bloc’s zero carbon goals while opening the prospect of further dependence on China amid heightened geopolitical tension with the West, analysts say. China accounts for 98% of EU rare earth permanent magnet imports. EU Commission spokesperson Johanna Bernsel said they could not confirm the Reuters findings, but said the bloc would do its best to promote projects that help meet the goals in the CRMA. “Projects in Europe will benefit from a streamlined permitting process, as well as coordinated support for accessing de-risking financing tools and matchmaking with downstream users,” Bernsel said.

There are three main steps in the rare earth supply chain before permanent magnets can be produced — mining, separating elements and producing metals/alloys (the latter two both come under the processing target). Reuters compiled production forecasts from companies and compared those with a demand forecast in a report by two EU-funded bodies to assess how the bloc is faring compared to its goals. According to the Reuters analysis, the EU is due to have only scant output from rare earth mines by 2030; and there is similarly only one project in the metals and alloys sector, which is low margin. The bloc, however, is likely to meet one target in its most advanced area, separation, producing 45% of needs by 2030. The final stage of the supply chain — producing magnets from the metals — is not covered by the targets in the new law since they are a finished product, but EU output is expected to meet only 22% of expected demand by 2030, according to the Reuters analysis. Obstacles to boosting EU rare earths output include public opposition to new mines, wary support by European industry which benefits from cheap Chinese imports, limited funding, uncertain demand as EV sales growth falters and weak prices for the metals.

Reuters