Europe joins the rare earth gamble, betting on the future right next door to Russia

(Dan Tri) - To escape China's mineral "golden hoop", Europe has just made a bold move: focusing on the region's largest magnet factory. Ironically, this trump card is right in Russia's sight.

The small industrial city of Narva has become the focus of attention for European investors and policymakers these days. Here, Neo Performance Materials, a Canadian company, inaugurated the continent’s largest rare earth processing and magnet manufacturing plant in mid-September.

What raised eyebrows among financial observers was not just the scale of the project, but its location. The plant sits close to the Narva River – the natural border that separates Estonia from Russia. From the factory windows, one can see the territory of the military power on the other side.

The NEO magnet factory in Narva, a city in northeastern Estonia, is a facility that specializes in producing rare earth magnets for Europe's electric vehicle and wind power industries (Photo: Getty).

Neo CEO Rahim Suleman is optimistic about production capacity. The facility plans to produce 2,000 tons of rare earth magnets this year, before increasing capacity to 5,000 tons to keep up with the rapid growth of the market. These components are considered the "heart" of electric vehicles, wind turbines, smartphones and even high-precision weapons.

Although the geographical location raises big security questions, especially when Russian President Vladimir Putin has mentioned Narva with historical statements, from an economic perspective, this is a calculated move.

Estonia has existing infrastructure, high-quality human resources and, more importantly, strong financial support from the EU with a grant of 18.7 million euros. Neo has also quickly signed contracts with big names in the automotive supply chain such as Schaeffler and Bosch, creating a solid foundation for product output.

Escaping Beijing's "pincers": The battle for survival

Why would Europe put a strategic asset in such a sensitive position? The answer lies in two words: China.

The " world factory" is holding a near-absolute monopoly. Beijing controls nearly 60% of global mining output and more than 90% of global rare earth magnet production. In the EU alone, the number of people dependent on China for rare earth supplies is up to 98%.

This dominance is like a "guillotine blade" hanging over the Western economy. "The threat is still there. This forces the West to wake up to the risks it faces," said Ryan Castilloux, CEO of Adamas Intelligence, figuratively.

These concerns have been proven correct. Although China agreed in October to postpone further export controls following the US-China summit, the previous restrictions remain in place. A survey by the EU Chamber of Commerce in China found that 60% of businesses were concerned about disruptions to their supply chains, and 13% were even worried about having to halt production.

In that context, the Narva plant is expected to meet about 10% of the EU’s magnet demand. This figure, while modest compared to the total estimated market demand of 20,000 tonnes, is a vital first step in breaking the monopoly.

Economic problem: Billions exchanged for trillions

From a financial perspective, the rare earth race is a huge cost-benefit problem. Mr. Ryan Castilloux commented that this is an issue worth billions of dollars in input, but decides the fate of downstream industries worth trillions of dollars.

But Europe’s path to self-sufficiency has not been smooth. Analysts point to a number of obstacles: a lack of investment, cumbersome regulations, high production costs and fragmented intra-regional supply chains. China, with its scale advantage and historically lax environmental regulations, has kept prices low, making it difficult for Western rivals to compete on an equal footing.

Rare earths, a group of minerals used to make magnets, are vital to the automotive, electronics and defense industries (Photo: Adobe Stock).

To address this, the EU is implementing the “RESourceEU” plan and establishing the European Raw Materials Alliance (ERMA). The strategy goes beyond new mining and aims at a circular economy: recycling magnets from old equipment. This is a long-term approach to reducing dependence on finite and expensive natural resources.

At the same time, Brussels is also having to "renew" its economic security strategy, ready to use stronger trade tools to protect the bloc's interests against dual pressures: on one side is the "squeezing" of supply from China, on the other side is the unpredictable trade protection policy from the US under Donald Trump.

Regardless of whether the Narva plant or the recycling initiatives succeed, experts remain cautious. Caroline Messecar of Fastmarkets stresses that Europe needs to ramp up capacity even further if it is to dream of a diversified supply chain.

The rare earths game is no longer simply a matter of trading minerals. It is a chessboard of the century where Europe is accepting geopolitical risks at its doorstep in exchange for the safety of future economic flows. As one industry expert put it: "Speed ​​is now the key. We are racing against time as the trade cards can be turned over at any moment."

Source: https://dantri.com.vn/kinh-doanh/chau-au-tham-gia-canh-bac-dat-hiem-dat-cuoc-tuong-lai-ngay-sat-vach-nga-20251208222312634.htm