Rare earth magnet makers enjoy a moment in the sun

Rare earth magnet makers are facing a tough time as Western countries scramble to build domestic “mine-to-magnet” supply chains and cut costs. dependence on China.

An eventful year supply restrictions And tariff threats has put the strategic importance of magnet makers in the spotlight as rare earths have become a priority amid the ongoing geopolitical rivalry between the United States and China.

Magnets made from rare earths are essential components for everything from electric vehicles, wind turbines and smartphones to medical equipment, artificial intelligence applications and precision weapons.

It is against this backdrop that the United States, European Union and Australia, among others, have sought to break China’s mining dominance by taking a series of strategic steps to support magnet manufacturers, including invest massively in factories, support the construction of new factoriesand increasing processing capacity.

The United States and Europe, in particular, are expected emerge as key growth markets for rare earth magnet production over the next decade. Analysts, however, remain skeptical that Western countries will be able to escape China’s mining orbit anytime soon.

“Frankly, we were the solution to a problem the world didn’t know existed,” Rahim Suleman, CEO of Canada’s Neo Performance Materials Group, told CNBC via video call.

“The end market is growing from a physics perspective, not software, so it has to grow that way,” he continued. “And it’s not dependent on any single end market, so it’s not dependent on automotive, battery electric vehicles, drones or wind farms. It’s any energy-efficient engine across the spectrum,” Suleman said, referring to demand for magnets from fast-growing industries such as robotics.

His comments came about three months after Neo kicked off the grand opening of its rare earth magnet factory in Narva, Estonia.

Located directly on Russia’s doorstep, the facility is widely anticipated play an essential role in Europe’s plan to reduce its dependence on China. The European Union’s industry chief, Stéphane Séjourné, for example, praised the plant’s strategic importance, saying at an event in early December that the project marked “a culmination of Europe’s sovereignty.”

Neo’s Suleman said the Estonian facility is on track to produce 2,000 tonnes of rare earth magnets this year, before scaling up to 5,000 tonnes and beyond.

“Globally, the market is 250,000 tonnes and will reach 600,000 tonnes, more than doubling in ten years,” Suleman said. “And more importantly, our concentration is 93% in a single jurisdiction, so when you put those two factors together, I think you will find an extremely fast-growing market.”

Certainly, the global supply of rare earths has long been dominated by Beijing. China is responsible for nearly 60% of global rare earth mining and more than 90% of magnet manufacturing, according to the International Energy Agency.

A recent report from consulting firm IDTechEx estimated that rare earth magnet capacity in the United States is on track to increase nearly sixfold by 2036, with this expansion driven by strategic support and funding from the Department of Defense, as well as increased midstream activity.

At the same time, magnet production in Europe is expected to grow 3.1 times over the same period, supported by the European Union. Critical Raw Materials Actwhich aims for national production to satisfy 40% of the region’s demand by 2030.

John Maslin, CEO of Vulcan Elements, a North Carolina-based producer of rare earth magnets, told CNBC that the company was looking to expand as quickly as possible “so that this fundamental supply chain doesn’t hold America back.”

Vulcan Elements is among the companies to receive direct funding from the Trump administration. The magnet maker received Last month, the Department of Defense provided a direct federal loan of $620 million to support domestic magnet production.

“Rare earth magnets convert electricity into motion, which means that virtually all advanced machines and technologies (the innovations that shape our daily lives and keep us safe) require them to be operational,” Maslin told CNBC by email.

“The need for high-performance magnets is accelerating exponentially amid increasing demand and production of advanced technologies, including hard drives, semiconductor manufacturing equipment, hybrid/electric motors, satellites, aircraft, drones and almost all military capabilities,” he added.

Separately, Wade Senti, president of Florida-based magnet maker Advanced Magnet Lab, said the only way to implement alternative supply chains is to be innovative.

“Demand for rare earth permanent magnets from non-Chinese sources is skyrocketing,” Senti told CNBC via email.

“The challenge is whether U.S. magnet producers can create a fully domestic (excluding China) supply chain for these magnets. This requires the magnet manufacturer to take the lead and bring the supply chain together – from mine to magnet to customers,” he added.