Schaeffler signs historic first European rare earth supply deal

German automotive supplier Schaeffler has signed a rare earth magnets supply deal with Norway's REEtec to drive plans for the rapid growth of its electric vehicle motor business.

It is the first deal made by a European automaker or supplier to source the raw materials from within the continent.

The news comes at a time when the European Union, the US and Britain are racing to reduce their reliance on China, which in 2021 accounted for over 60% of the world's rare earth production. Used in wind turbines and EV batteries, securing the supply of rare earths and super strong magnets is vital for EU to achieve the goals of its European Green Deal and "Fit for 55" package.

Read more: EU lays out "Fit for 55" goals to cut carbon emissions

The aim is to improve the sustainability of electric motors along the value chain by securing supply from a company such as REEtec, which uses more sustainable production practices. Manufactured using rare earth metals like neodymium, powerful permanent magnets are used to produce optimum magnetic flux in electric motors.

Schaeffler, which has been producing EV motors on a large scale since 2021, usually purchases pre-manufactured components for its motors from subcontractors known as Tier 2 suppliers.

The company's drive to cut emissions in its supply chain by 25% by 2030 had led it to start sourcing raw materials for the first time, instead of ready-made magnets. Schaeffler aims to be carbon neutral by 2040.

"Rare earths play an important role in the automotive and industrial segments. Schaeffler is focusing on achieving sustainability along the entire value chain and is systematically gearing its activities to the use of materials produced cleanly and sustainably," said Schick.

REEtec, which has been separating rare earths on a large scale since 2019, will process raw materials produced by Australian miner Vital Metals at its facility in Nechalacho in the Northwest Territories of Canada.

Read more: France's €1bn plan to secure battery metals

"We are delighted to have signed a five-year contract with Schaeffler and to be partnering with a globally successful market leader that prioritises sustainability and transparency in the supply chain,” said Sigve Sporstøl, CEO of REEtec.

He added that the deal had allowed REEtec to construct its rare earths separation facility in Herøya, near Porsgrunn in southeast Norway.

With the automotive sector across Europe gearing up for a leap in EV production, companies have been signing contracts with miners for the raw materials necessary for battery production such as lithium, cobalt and nickel but so far such deals had been limited in the rare earth sector.

Last year, General Motors and General Electric signed a deal covering North America but this is the first of its kind in Europe.

Read more: GM & General Electric to develop rare earths EV supply chain

Despite the name, rare earths are not rare, but the ore does require complex processing, which can generate toxic waste, in order to be separated into the 17 individual elements and produce the alloys used in a wide range of consumer electronics, as well as EV batteries.

Sporstøl says that REEtec uses a less energy-intensive technology under which nearly all the chemicals used in processing are recovered and reused. 

No details regarding the value of the transaction or the production quantity, have been provided.

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