EV parts maker Schaeffler signs first of a kind European rare earth deal
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[April 20, 2022] By
Eric Onstad
LONDON (Reuters) - German auto parts
supplier Schaeffler has signed a raw materials deal to ensure the supply
of rare earth magnets from Europe for its burgeoning electric vehicle (EV)
motor business, an executive told Reuters.
It is the first reported agreement by a European auto sector supplier or
automaker to source rare earths within the region.
The European Union is spearheading a drive to boost domestic production
of rare earths and super strong magnets used in EVs and wind turbines to
cut dependence on top supplier China.
Schaeffler has agreed a five-year deal with Norway's REEtec to supply
rare earth oxides from 2024, said Andreas Schick, Chief Operating
Officer of Schaeffler.
He declined to provide the value of the transaction, which is due to be
announced on Wednesday.
"We are transforming into an e-motor supplier and are ramping up
significantly," he said in an interview.
"Therefore on the rare earth side we need competent partners, not only
going through the standard supply chain through China, we need a local
supply chain for Europe."
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Automakers planning on massive jumps in EV production have agreed
contracts in recent years with miners for battery raw materials such as
cobalt, lithium and nickel, but such deals have been limited in the rare
earths sector.
General Motors Co in December reached an agreement to source rare earth
magnets in the United States, but this is the first reported one in
Europe.
The European Union, Britain and the United States are scrambling to
build domestic rare earth and magnet industries to wean themselves off
China, which supplies 98% of permanent magnets to Europe.
Schaeffler - a leader in bearings that it supplies to automakers such as
Volkswagen, General Motors and Honda - usually buys manufactured
components from subcontractors referred to as Tier 2 suppliers.
The company's focus on sustainability made it source raw materials for
the first time instead of ready-made magnets, Schick said.
Schaeffler, Germany's fifth biggest auto supplier by revenue, is also
working with European partners to use the rare earths processed by
REEtec to produce permanent magnets.
When asked if Schaeffler was prepared to pay a premium for
domestically-produced magnets produced in a sustainable and transparent
way, Schick said:
"From a commercial perspective, it's not a walk in the park, it's a
challenge, but that's our commitment to sustainability."
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![](../images/042022pics/busine29.jpg)
A piece of bastnasite ore, which contains rare earth elements, is
shown by Brock O'Kelly from Molycorp Minerals Mountain pass Mine in
Mountain Pass, Califonia August 19, 2009. REUTERS/David Becker
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He gave no indication of what the costs might be.
As a mature industry with tight margins, the auto sector is known for being
intensely focused on cutting costs, but industry sources said that there is a
growing acceptance among automakers and their suppliers that they must pay more
for rare earths sourced from Europe.
They can be marketed as more sustainable, which may justify charging the
customer a higher price, industry analysts say.
CLEANER TECHNOLOGY
Rare earths are not rare, but complex processing, which can generate toxic
waste, is required to separate ore into the 17 individual elements and produce
the alloys used in a range of electronics as well as in EVs.
Privately-held REEtec uses a cleaner technology needing less energy and under
which nearly all the chemicals used in processing are recovered and reused, said
Chief Executive Sigve Sporstøl. He declined to provide the quantity to be
produced.
REEtec has been running a demonstration plant since 2019 and the new deal will
enable the company to build a commercial separation facility, sourcing raw
materials from Vital Metals in Canada, which launched production last year.
Schaeffler, which also has an industrial division, wants to lock in supply of
permanent magnets to support its plan to be a major global supplier of electric
drivetrains to the fast-growing EV industry.
The EU expects demand for permanent magnets in EVs and wind turbines to increase
by as much as tenfold by 2050, when the EU and Britain have pledged to cut net
greenhouse gas emissions to zero.
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Schaeffler's e-mobility business generated 3.2 billion euros of orders last
year, results showed, nearly a third of total orders in its Automotive
Technologies division and much higher than an original target for e-mobility of
1.5 billion to 2 billion euros.
(Reporting by Eric Onstad; editing by Barbara Lewis)
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