EXCLUSIVE-EU considers aid for production of rare earth magnets – sources


Band Eric Onstad

LONDON, August 23 (Reuters)The EU is working on proposals to revive domestic production of a type of specialized magnet vital in electric car engines by offering support to local producers so that they can compete with their Chinese rivals, sources said. close to the situation.

Measures to support the production of rare earth permanent magnets would mirror legislation introduced in the United States earlier this month to offer tax credits to device makers there.

The US, EU and Britain aim to increase production of super strong magnets used in electric vehicles (EVs) and wind turbines to help meet targets of reducing carbon emissions and dependence on towards China, whose producers currently dominate the global sector.

European companies say they cannot compete with Chinese producers, who they say receive subsidies equivalent to about a fifth of their raw material costs, helping them supply 90% of the global magnet market.

The proposals being considered by the EU include both cheap financing and compensation for higher raw material costs, said two sources who saw the plans but were not authorized to speak publicly about them.

“If we are to invest our own capital, we will need to see a coordinated effort where our share of the capital attracts sufficient return,” said Constantine Karayannopoulos, Managing Director of Neo Performance Materials. NEO.TO.

Neo has the only commercial rare earth separation facility in Europe and is ready to build a $ 100 million permanent magnet plant in Estonia, Karayannopoulos added. He said he had not seen the EU’s proposals but supported a public / private effort to boost the sector.

CRITICAL MINERALS

The EU launched the European Raw Materials Alliance (ERMA) late last year to ensure the bloc has a range of essential minerals needed for its green transition and has given top priority rare earths.

The bloc aims to create a domestic rare earth mining, processing and magnet industry to reduce vulnerability to any disruption to Chinese supplies.

China supplies 98% of the EU’s demand for magnets made from rare earths, a set of 17 minerals used in a range of applications including electronics, defense and aerospace.

A Chinese rare earth industry official said the country’s policy to encourage export tax cuts for magnets has a long history and that the ultimate beneficiaries are the end users.

EU officials hope to repeat Europe’s success in building an electric vehicle battery sector, which has seen increased investment after the EU offered funding and coordination.

The battery effort has seen 40 billion euros ($ 47 billion) of investment pledged in 38 planned “gigafactories” over the past three years, climate group Transport & Environment said.

European attention is now on minerals used in permanent magnets, demand for which is expected to increase tenfold by 2050, when the EU and Britain pledged to reduce net gas emissions to zero Greenhouse effect.

Recommendations on how to set up a rare earth magnet industry from a group under the umbrella of ERMA are expected to be released next month, sources with knowledge of the situation said. An ERMA cluster action plan for rare earth magnets and motors has been forwarded to senior EU officials, they added.

A spokesperson for the European Commission declined to comment, but said any potential measure must be compatible with state aid and World Trade Organization rules.

A viable magnet industry in Europe would also need the support of customers, such as automakers, who must agree to pay a small premium to be guaranteed an environmental and traceable product, the sources said.

Thierry Breton, European Commissioner for the Internal Market, has agreed to approach car manufacturers for their support, they added. The Association of German Automobile Manufacturers (VDA) declined to comment on whether its members would support such a move.

Breton told a conference in June that the EU aims to supply 60% of the block’s magnet needs for wind turbines by 2030. “I think we are in a similar situation with rare earths and magnets. permanent as we were a few years ago with batteries and lithium, “he said at the time.

EXPANSION PLANS

Germany’s Vacuumschmelze (VAC), the only major producer of permanent magnets in the Western Hemisphere, waits to give the green light to expansion plans for a magnet manufacturing plant for the European electric vehicle industry booming until it is sure to have a viable business case.

“Chinese producers of permanent magnets are getting raw materials 25% below the price I can get them,” said Bernd Schleede, permanent magnet manager at VAC.

“To achieve a level playing field, either the EU should compensate for this gap or consider sanctions on the import of magnets. Personally, I would prefer the first option.”

He declined to comment on specific EU proposals.

Chinese producers receive a 13% refund of VAT on raw materials and typically receive a 10% subsidy for raw materials from local governments, Schleede said.

VAC mainly sells magnets specializing in high-tech fields, including industrial robots or automotive sensors.

There are three other small producers of permanent magnets in Europe, while the United States does not have such companies on a commercial scale, although one has a pilot project to produce magnets by recycling old ones.

($ 1 = 0.8524 euros)

(Reporting by Eric Onstad; Additional reporting by Tom Daly and Foo Yun Chee in Brussels; Editing by David Holmes)

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