Key takeaways:
- Neo’s new magnet plant in Narva, Estonia, marks a significant step in Europe’s rare earth magnet production. Plans are to scale output from 2,000 to 5,000 tonnes per year.
- China’s export controls on rare earths like terbium and dysprosium have heightened the importance of localized supply chains in Europe.
- The project was bolstered by a €18.7 million EU grant. As well as years of strategic planning to address technology, market and financial risks.
A factory for the future
“To the people of Narva this [magnet] factory is for you and your future,” Estonian Prime Minister Kristen Michal said at the opening ceremony.
The plant on the eastern edge of the country will be able to produce 2,000 tonnes per year of sintered high-temperature NdFeB magnets for the electric and hybrid drivetrains of its automotive customers, including Schaeffler and Bosch. There are plans to increase this to 5,000 tpy – enough for over 2 million vehicles.
Innovation and supply chain challenges
“Rare earths and rare earth magnets are one of the most important drivers of technology,” Neo Chief Executive Officer Rahim Suleman said.
“Robotics, physical AI, the electrification of vehicles, drones, robotics, wind farms and almost any energy efficient motor you can imagine,” he added.
Built in under two years, the opening ceremony comes six and a half months after China imposed export-controls. These have severely restricted supply of high-temperature NdFeB magnets and the heavy rare earths terbium and dysprosium needed to manufacture them.
No spot transactions for terbium or dysprosium oxide were reported in the seven days to September 18. Fastmarkets most recently assessed the price of dysprosium oxide 99.5% ex-whs Rotterdam at $825-850 per kg on September 18. This was more than triple the Chinese export price assessment of $230-280 per kg on the same day.
Liquidity has stuttered in Europe while high prices and low stocks put suppliers and customers in a difficult position. Consumption of dysprosium and terbium remains relatively small outside Asia. This is because it is mainly used in low-volume, high-tech applications. But they are a vital additive for the small but growing rare earth magnet industry.
Expanding rare earth capabilities in Estonia
In August, Neo announced that construction was underway to add a small heavy rare earth line at its 2,000 tpy light rare earth separation plant Silmet in Sillamäe. This is located around 30km from the Narva magnet plant.
“We can separate heavy rare earths, we can separate light rare earths, we can make rare earth metals and we can make rare earth magnets and we can do all these things with a parallel rare earth supply chain inside China and outside of China.” Suleman said.
Strategic planning and supply chain challenges
The lightning speed of execution and fortuitous timing belie the years of thoughtful planning and patient negotiation that went into the Narva magnet project.
“There are three fundamental risks for a project like this: the technology risk, the market risk and the financial risk,” Constantine Karayannopoulos industry consultant and former Neo CEO told Fastmarkets. “It starts with the customer, the demand pull.”
“We intensified our activities in the supply chain more than seven years ago,” Bernd Emig, vice president of purchasing business division E-Drives at Schaeffler Group, told Fastmarkets.
“We analyzed the value add of each process step under consideration in the target region of operation,” Emig said.
A key turning point for the project was the receipt of a €18.7 million ($22 million) grant. This was funded by the EU’s Just Transition Fund in 2022.
“I think we will see a trend for shortening supply chains,” Karayannopoulos said. “But you also need the skills and knowledge. We have a blind spot in the West. We do not have enough people who understand the science, the chemical engineering and metallurgy.”
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