Taking on China from Russia’s border: Inside Europe’s biggest rare earths factory

NARVA, Estonia — Europe's large stake to interruption China's uncommon earths dominance starts connected Russia's doorstep.

The continent's largest rare-earth facility, situated connected the precise borderline of NATO's eastbound flank, is ramping up magnet accumulation arsenic portion of a regional push to trim its import reliance connected Beijing.

Developed by Canada's Neo Performance Materials and opened successful mid-September, the magnet works sits successful the tiny concern metropolis of Narva. This little-known borderline metropolis is separated from Russia by the Narva River, which is an outer frontier of some NATO and the European Union.

Analysts expect the installation to play an integral relation successful Europe's program to trim its dependence connected China, portion informing that the portion faces a agelong and hard roadworthy up if it is to execute its mineral strategy goals.

Magnets made from uncommon earths are indispensable components for the relation of modern technology, specified arsenic electrical vehicles, upwind turbines, smartphones, aesculapian equipment, artificial quality applications and precision weaponry.

Speaking to CNBC by video call, Neo CEO Rahim Suleman said installation is connected way to nutrient 2,000 metric tons of uncommon world magnets this year, earlier scaling up to 5,000 tons and beyond arsenic it seeks to support gait with "an enormously speedy increasing market."

The European portion currently imports astir each of its uncommon world magnets from China, though Suleman expects Neo's Narva installation to beryllium susceptible of fulfilling astir 10% of that demand.

"Having said that, our presumption of that fig is thing similar 20,000 tons. So, we'd person a batch much enactment to do, a batch much buiding to bash due to the fact that I deliberation the customers person a existent request to diversify their proviso chains," Suleman said.

"We're not talking astir independency from immoderate jurisdiction. We're conscionable talking astir creating robust and divers proviso chains to trim attraction risk," helium added.

Neo has antecedently announced archetypal contracts with Schaeffler and Bosch, large car suppliers to the likes of German car giants Volkswagen and BMW.

Europe's propulsion to present connected its assets information goals look respective obstacles. Analysts person cited issues including a backing shortfall, burdensome regulation, a constricted and fragmented made-in-EU proviso concatenation and comparatively precocious accumulation costs. All of these rise questions astir the viability of the EU's ambitious proviso concatenation targets.

"Europe needs a large summation successful uncommon world magnet capableness to adjacent travel adjacent to a diversified proviso concatenation for its carmakers," Caroline Messecar, an expert astatine Fastmarkets, told CNBC by email.

Once a antecedently obscure issue, uncommon earths person travel to the fore arsenic a cardinal bargaining spot successful the ongoing geopolitical rivalry betwixt the U.S. and China.

In October, China agreed to delay the instauration of further export controls connected uncommon world minerals arsenic portion of a woody agreed betwixt China's Xi Jinping and U.S. President Donald Trump. China's earlier uncommon earths restrictions, which upended planetary proviso chains, stay successful place, however.

"The menace is inactive there; the guillotine inactive looms. And so, I deliberation collectively each of this has conscionable sobered the West, end-users and governments to the risks that they face," Ryan Castilloux, managing manager of captious mineral consultancy Adamas Intelligence, told CNBC by phone.

"It is simply a frankly a billion-dollar occupation that affects trillion-dollar downstream industries. So, it is worthy solving," helium added.

Europe, successful particular, has been caught successful the crosshairs of tariff turbulence. In its Autumn 2025 Economic Forecast, the European Commission, the EU's enforcement arm, identified Chinese export controls starring to proviso concatenation disruptions successful respective sectors specified arsenic autos and greenish energy.

It thrusts the contented of proviso diversification successful the spotlight for European policymakers, particularly arsenic request is projected to turn until 2030 and EU proviso remains highly reliant connected a azygous supplier, according to a connection from a European Commission spokesperson.

In response, European Commission President Ursula von der Leyen announced successful October that plans were underway to motorboat a alleged "RESourceEU" program — on the lines of its "REPowerEU" initiative, which sought to flooded different proviso contented — energy.

The Narva task predates these measures but, with 18.7 cardinal euros ($21.7 million) successful EU funding, it's an illustration of what the EU hopes to achieve. And though its output is humble erstwhile compared to wide demand, it demonstrates however the EU plans to boost the bloc's magnet output capableness and trim dependence connected Chinese supply.

The determination of Neo's caller magnet facility, meanwhile, has raised immoderate eyebrows, fixed the imaginable information situation of being successful specified adjacent proximity to Russia.

Speaking soon aft Moscow's full-scale penetration of Ukraine successful aboriginal 2022, Russian President Vladimir Putin said Narva was historically portion of Russia and needed to beryllium taken back.

Asked wherefore the institution positioned its caller uncommon earths works there, Neo's Suleman said the steadfast already had an existing infrastructure beingness successful the state "and the close spot was to beryllium successful Europe."

"And past you spell 1 measurement deeper, which is to get into Estonia. We person a agelong past successful Estonia. We already person a uncommon separation installation that tin bash some airy uncommon earths, and we're processing dense uncommon earths there," Suleman said.

"We've been highly impressed by the prime of the radical successful Estonia, their acquisition level, their committedness to hard enactment ... So, you enactment each that together, on with the enactment that we received some successful Estonia and successful the EU, and it was a large prime for us," helium added.

Estonian lawmakers person welcomed the imaginable of Neo's magnet plant, saying the installation volition payment the improvement of some the state and broader region.

Jaanus Uiga, lawman caput wide for Energy and Mineral Resources of Estonia, said Neo's magnet works opened "very connected time."

Speaking to CNBC connected Oct. 30, Uiga acknowledged economical tensions betwixt the U.S. and China implicit uncommon earths, saying Estonia and the EU needed to accommodate to an evolving situation.

"It is simply a precise unsocial processing capableness that was built successful Estonia and besides we are precise blessed for that due to the fact that it happened successful a portion that is transitioning distant from fossil fuels," Uiga told CNBC's "Squawk Box Asia."