Europe and the US want to promote independent production of rare earths

International Business News – Europe and the United States are accelerating their own production of rare earths, which are indispensable for pure electric vehicles (EVs) and wind turbines, and Sweden has discovered the largest deposit in Europe in case there are unforeseen events that prevent it from being sourced from China, the largest supplier. From the point of view of economic security and safety, it seeks to get rid of dependence on China.

“It’s good news not only for us and Sweden, but for Europe and climate (change policy). You can’t make pure electric cars without rare earth deposits,” said Jan Mostrom, chief executive officer (CEO) of the country’s mining giant LKAB, which discovered rare earth deposits in Kiruna, northern Sweden, revealing plans to apply for the mining permits needed to start investigations during 2023.

LKAB plans to mine rare earths as a by-product of phosphoric acid in the future, but as of now, it is still unknown what rare earths can be mined, etc. The new deposit has found reserves of more than 1 million tons of rare earth oxides.

Jan Moström said that the actual mining and supply of rare earths “generally takes at least 10 to 15 years”. The European Commission, the executive body of the European Union (EU), is discussing adjustments to the approval process for purely electric vehicle material mining projects in the region, and is expected to propose a bill in March. If passed, the time until supply could be reduced to less than half.

The background of the EU’s intensified intra-regional production is the concern of dependence on China. The EU region lacks rare earth mining sites and is 98% dependent on imports from China. On the other hand, the demand for materials for purely electric vehicles is bound to expand further as the EU proposes a complete ban on new sales of gasoline and diesel vehicles by 2035.

European Commission President Von der Leyen said that rare earths, which are indispensable for magnets for pure electric vehicle motors, and lithium, which is one of the main materials for on-board batteries and a rare metal, will be more important than oil and gas.

The European Commission’s Joint Research Centre (JRC) predicts that demand for lithium will increase to 18 times current consumption by 2030 and 60 times by 2050. In the EU, almost all lithium is imported from outside the region, such as Chile and Russia.

French mining major Imerys announced in October 2022 that it would launch lithium mining at Beauvoir in central France. The plan is to mine 34,000 tons per year starting in 2028, which could satisfy about 700,000 pure electric vehicles. The deposit was previously put on hold due to high costs, but has become profitable due to rising lithium prices and subsidies. The same project will also be advanced in Germany and the Czech Republic.

The Biden administration will aggressively promote the development of strategic materials in order to strengthen the supply chain in the U.S. In 2022, it has decided to provide subsidies to sites fully involved in mining, separation and smelting in the western state of California. In the southern state of Texas, funding has been provided to a separation and smelting site built by Linus, a major Australian rare earth company.

In December 2022, the Japanese government classified rare earths as “specified important materials” under the Economic Security Promotion Act, and will accelerate domestic reserves, on the other hand, there is a trend to build smelters.

Cost and environmental protection are barriers

Countries have identified rare earth and rare metals including lithium as strategic materials and accelerated their independent production.

While rare earth ores can be mined outside China, the environmental load of the smelting and separation processes that remove impurities from the ores and extract the minerals is huge. As a result, it has gradually moved from the United States to China, where labor costs are low and environmental protection policies are relaxed.

The obstacles to restarting production in America and Europe, where environmental policies are strict, are high. In January 2022, the Serbian government cancelled a permit for Anglo-Australian resources giant Rio Tinto to exploit lithium at Jadar in the west of Serbia. It was expected to be the largest lithium mine in Europe with an annual production capacity of 58,000 tons, but the license was canceled due to demands from environmental groups.

Leading Edge Materials, a Canadian company, also planned to develop rare earth deposits in southern Sweden, but the project has been stalled for more than 10 years due to opposition movement over forest destruction and lake water pollution. The rare earth deposit is located in Sweden, which is likely to be opposed by environmental groups.

Japan, the United States and Europe are strengthening cooperation. Strengthening the supply chain is one of the key elements of the Indo-Pacific Economic Framework (IPEF), a new economic sphere initiative led by the United States that will be launched in 2022. How to solve the cost and location problems while cooperating with Allies and regions will be the elements of breaking away from China’s dependence.