Russia Could Disrupt Rare Earths Supply Chain Between US and Europe – Quartz

A rare earth supply chain between the United States and Europe could be disrupted by sanctions against Russia, which would delay Europe’s attempts to reduce its dependence on China for materials reviews.

Launched last year by two North American companies, the initiative begins in Utah, where a mining by-product called monazite is transformed into mixed rare-earth carbonates. This is then shipped to Estonia to be separated into individual rare earth elements, which are sold to downstream companies to produce things like rare earth permanent magnets, which are used in high-tech products such as electric vehicles and wind turbines.

The Silmet rare earth separation plant, located in the Estonian seaside town of Sillmäe, is operated by Canadian company Neo Performance Materials and is the only commercial facility of its kind in Europe. But while Silmet sources its mixed rare earth materials from US-headquartered Energy Fuels, 70% of the rare earth raw materials it processes actually come from a single company in Russia, according to Neo.

“Unfortunately, with the war in Ukraine and the sanctions regime, uncertainty hangs over [the Russian supplier]“said CEO Constantine Karayannopoulos during an earnings call earlier this month.

Sanctions Contingency Planning

While the Russian supplier, Solikamsk Magnesium Works, has so far not been sanctioned, its ability to supply Neo with raw rare earths would be limited if it were subject to expanded US and EU sanctions.

According to Karayannopoulos, Neo is now working with a global sanctions law firm to review the legal aspects of the firm’s operations. Neo is also talking to “half a dozen emerging producers” around the world to look at ways to diversify its sources of rare earth raw materials beyond Solikamsk in Russia and Energy Fuels in the United States. While Energy Fuels could increase its supply to Neo, it depends on its ability to source additional monazite sands.

That said, Neo also has rare earth separation facilities in China, “so reliance on Silmet isn’t entirely dramatic,” noted Thomas Krümmer, director of Ginger International Trade and Investment, a Singapore-based company specializing in management of the rare earths supply chain.

Increase European dependence on China?

Yet a prolonged supply disruption to Silmet’s Neo plant due to sanctions against Russia would have ripple effects across Europe.

“European ‘consumers’ of the downstream rare earth products produced by Neo Performance Materials are likely to look to China if Neo’s production is disrupted by longer-term raw material shortages,” said David Merriman, Managing Director metals and mining research at Wood Mackenzie, a Consultancy. “This is because there are few alternatives to Neo outside of China when it comes to separated high purity rare earth compounds, especially when considering those with a product to buy on square.”

Europe currently sources 98% to 99% of rare earths from China, according to a 2020 European Commission report. But while accounting for only a tiny share, Russia also supplies Europe with rare earths. , and a disruption there would force the latter to turn to China.

“Europe depends on Russia for a number of [rare earth] refined materials, so if sanctions affect these supply chains, the next choice is only China in the short term,” said Nabeel Mancheri, secretary general of the Brussels Rare Earths Industry Association.

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