Inside Neo’s rare earths factory

NARVA, Estonia – Europe’s big bet on breaking China’s dominance of rare earths begins on Russia’s doorstep.

The continent’s largest rare earth facility, located on the edge of NATO’s eastern flank, is ramping up magnet production as part of Regional batch To reduce its dependence on imports from Beijing.

Developed by Canadian company Neo Performance Materials and open In mid-September, the magnet factory is located in the small industrial city of Narva. The Narva River separates this little-known border city from Russia, which is the external border of both NATO and the European Union.

Analysts expect the facility to play a key role in Europe’s plan to reduce its dependence on China, while warning that the region faces a long and difficult road if it wants to achieve its goals. Minerals strategy objectives.

Rare earth magnets are essential components for the function of modern technology, such as electric cars, wind turbines, smartphones, medical equipment, artificial intelligence applications and precision weapons.

Speaking to CNBC via video call, Neo CEO Rahim Soliman said the facility is on track to produce 2,000 metric tons of rare earth magnets this year, before hitting 5,000 tons and beyond as it seeks to keep up with a “very fast-growing market.”

European region Currently imports Almost all rare earth magnets come from China, although Solomon expects the New Narva facility to be able to meet about 10% of that demand.

“However, our view for that number is around 20,000 tons. So, we will have a lot of work to do, a lot more building to do because I think customers have a real need to diversify their supply chains,” Soliman said.

He added: “We are not talking about independence from any jurisdiction. We are just talking about creating strong and diversified supply chains to reduce concentration risks.”

New has previously Announce The initial contracts are with Schaeffler and Bosch, major vehicle suppliers to the likes of the German auto giants Volkswagen and BMW.

Europe’s efforts to achieve its resource security goals face many obstacles. Analysts have cited issues including a lack of funding, onerous regulation, a limited and fragmented made-in-the-EU supply chain, and relatively high production costs. All of this raises questions about the feasibility of the EU’s ambitious supply chain targets.

“Europe needs a significant increase in rare-earth magnet capacity to get closer to a diversified supply chain for its automakers,” Caroline Mesecar, an analyst at Fastmarkets, told CNBC via email.

In October, China He agreed to postpone Imposing further controls on exports of rare earth minerals as part of a deal agreed between China Xi Jinping And the American president Donald Trump. However, China’s earlier restrictions on rare earth metals, which upended global supply chains, remain in place.

“The threat is still there, the guillotine is still looming. And so I think all of this collectively has woken up the West and end users and governments to the risks that they face,” Ryan Castillo, managing director of critical minerals consulting firm Adamas Intelligence, told CNBC by phone.

“It’s frankly a billion-dollar problem that affects a trillion-dollar manufacturing industry. So, it’s worth solving,” he added.

Europe, in particular, has been caught in the crosshairs of tariff disruptions. In it Economic forecasts for fall 2025The European Commission, the executive arm of the European Union, has identified Chinese export controls as leading to supply chain disruptions in several sectors such as automobiles and green energy.

It puts the issue of supply diversification in the spotlight for European policymakers, especially as demand is expected to grow until 2030 and EU supplies remain largely dependent on a single supplier, according to a statement from a European Commission spokesperson.

In response, European Commission President Ursula von der Leyen said Announce In October, plans were afoot to launch a so-called “RESourceEU” scheme – similar to its “Restore power“An initiative that sought to overcome another supply issue – energy.

The Narva project precedes these measures but with… 18.7 million euros ($21.7 million) of European Union funding, which is an example of what the European Union hopes to achieve. Although its production is modest compared to overall demand, it shows how the EU plans to boost the bloc’s magnet production capacity and reduce dependence on Chinese supply.

China is the undisputed leader in the critical minerals supply chain, responsible for nearly 60% of the world’s rare earth mining and more than 90% of magnet manufacturing. Meanwhile, Europe is the largest export market for Chinese rare earths.

Speaking shortly after Moscow’s large-scale invasion of Ukraine in early 2022, Russian President Vladimir Putin said: He said Narva was historically part of Russia and needed to be restored.

In response to a question about why the company would locate its new rare earth plant there, New Sulaiman said the company already has an existing infrastructure presence in the country and “the right place would be in Europe.”

“Then you have to take a deeper step, which is to get to Estonia,” Sulaiman said. “We have a long history in Estonia. We already have a rare earth separation facility that can do both light rare earths, and we are developing heavy rare earths there.”

“We were very impressed by the quality of the people in Estonia, their level of education, their commitment to hard work… So, you put all that together, along with the support we received both in Estonia and the EU, and it was a great choice for us,” he added.

Estonian lawmakers have welcomed the potential of the NEO magnet factory, saying the facility will benefit the development of both the country and the wider region.

János Uija, Deputy Secretary-General for Energy and Mineral Resources of Estonia, said the NEO magnet plant was opened “very on time.”

Speaking to CNBC on October 30, Oiega acknowledged the economic tensions between the US and China over rare earths, saying Estonia and the EU need to adapt to the evolving situation.

“It’s a very unique processing capacity built in Estonia, and we’re also very happy about it because it happened in a region that is transitioning away from fossil fuels,” Uija told CNBC.Squawk Asia Fund“.