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No substitute for EU rare earths policy

Metal Tech News - November 28, 2022

REIA urges EU to secure rare earth supplies to ensure adequate battery materials to meet 2030 EV targets.

Securing an adequate supply of magnet rare earths to help make the most out of the highly competitive lithium battery materials should be an essential element of the European Union's electric vehicle strategy, according to the Rare Earth Industry Association.

REIA delivered this message in response to the European Commission's call for input on the proposed European Critical Raw Materials Act, which aims to ensure the EU has secure and adequate supplies for "the new gas and oil" of the clean energy future.

"Lithium and rare earths will soon be more important than oil and gas," European Commission President Ursula von der Leyen said during her State of the Union address in September. "Our demand for rare earths alone will increase fivefold by 2030. [...] We must avoid becoming dependent again, as we did with oil and gas."

During her speech, von der Leyen said the EU transition to green and digital technologies "will live or die" by the bloc's critical material supply chains.

"This is why today I am announcing a European Critical Raw Materials Act," she said.

To help shape this critical materials legislation, the European Commission put out a call for input from governments, industry, and other stakeholders.

In its response, REIA encouraged a holistic approach to ensuring adequate raw materials are fed into the EU's electric vehicle supply chain.

"If one type of Critical Minerals (e.g. rare earths) is not addressed appropriately, then the policy prescription for Battery Materials – that has been successful so far – becomes inadequate," the rare earths association inked in a letter that covers the needs, risks, and proposed solutions to establishing an EU rare earth supply chain.

No credible substitute

The European Commission says China's "quasi-monopoly on rare earths and permanent magnets" has become a real geopolitical tool that could be used to hobble the EU's economic aspirations.

"We saw it in 2010, when China slashed rare earth exports worldwide and entirely cut Japan off to pressure Tokyo to release a detained Chinese fishing trawler captain," the group charged with EU strategy penned in a note following von der Leyen's State of the Union address.

The supply chain risks posed by China's dominance, coupled with rising prices due to the rocketing demand, has some considering EV motors that do not depend on rare earth magnets.

REIA, however, argues that the switch to motors without rare earths would decrease EV efficiency and increase the need for battery materials.

"For an EV to achieve a given range without using rare-earth permanent magnets in the drivetrain motor design, the energy loss will be higher, and therefore the battery will have to be circa up to 30% larger," the rare earth association wrote.

Based on figures from Argonne National Laboratory, building EVs without rare earth magnets in the motors would require up to 315,000 metric tons more nickel, 180,000 metric tons more manganese, 126,000 metric tons more cobalt, and 72,000 metric tons more lithium to achieve the goal of 30 million EVs sold in the EU by 2030.

"None of these critical minerals for batteries are in (or will be) in adequate supply by 2030 to satisfy the target demand – even if prices keep rising more, at which point EVs will become so uneconomical that even consumer incentives will not suffice to create momentum for transition to them," REIA penned in its report to the European Commission.

On the other hand, it would take about 19,000 metric tons of magnet rare earths – neodymium, praseodymium, dysprosium, and terbium – to build the higher efficiency motors for the 30 million EVs to achieve the EU's target.

"Therefore, there is no credible substitute for automotive drivetrain motor applications that does not use rare earth permanent magnets, while also achieving energy efficiency in a way that could truly support the large-scale transition from ICEs (internal combustion engines) to EVs," REIA wrote.

Addressing financial risks

REIA says three interrelated risks – market, technology, and financial – must be addressed to establish a rare earth supply that breaks the EU's dependence on China and ensures the European bloc keeps pace with less adversarial competitors such as the United States in a global race for the supply and recycling of rare earths.

While the market risks are largely addressed by the European Green Deal and the technology risks are being addressed by the EU HORIZON funding programs, REIA says the EU has not adequately addressed the financial risks associated with rare earths landscape in Europe.

This is because the most strategic rare earth assets in the European Union are found in smaller EU member states that do not have the financial wherewithal to tackle the financial risk of the rare earth supply chain solutions they host.

To level the playing field, REIA suggests that the magnitude of the European Sovereignty Fund be leveraged for financing of projects of up to 80 million euros (US$83 million).

"It takes support of this kind to unlock the business cases of such strategic asset in smaller EU Member States– a funding tool that has the unique ability to support CAPEX with sustainability-linked outcomes," the rare earth association wrote.

Bold, less naïve solutions

Other policy solutions proposed by the REIA include:

EU strategic projects list – Empower the European Commission to create a list of strategic projects of interest in member states that do not have the financial wherewithal to tackle the financial risk in future technologies and production of critical raw materials.

Premium for domestic supply and ESG – A price premium on wind energy developers that include at least 10% of their permanent magnet supply from EU-domestic manufacturers that report on ESG (environmental, social, and guidance) criteria.

Incentives for supply chain diversification – Tax incentives for EV motors and wind turbine manufacturers that buy rare earth permanent magnets from EU-made sources. REIA says these incentives need to represent a 20-30% premium over imported China prices to be effective.

Raw materials investment vehicle – An EU-supported investment and procurement organization modeled after the Japan Organization for Metals and Energy Security (JOGMEC) to act as a lead buyer and pooler of raw materials demand across European countries.

These suggestions seem to be in line with the sense of urgency being expressed by the European Commission.

"In the current perma-crisis context, the European Union needs to find the means to harness globalisation differently," the commission penned in a statement announcing the European Critical Raw Materials Act. "We need to be more assertive and less naïve in defending our economic interests and our values. Including when it comes to strategic raw materials."

Author Bio

Shane Lasley, Metal Tech News

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With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.

 

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