Neo pushes for vertical integration on rare earths

Canadian rare earth magnet and specialty material producer Neo Performance Materials is doubling down on its vertical integration strategy for US and European electric vehicle (EV) markets.

Intense and unpredictable price volatility has hobbled previous attempts to build out rare earth magnet supply chains in the western hemisphere, according to industry observers. Neo is trying to tackle by this by moving upstream and is also building on its expertise in bonded rare earth magnet production to establish new manufacturing capacity in Europe.

Rare earth magnet motors are the most energy-efficient choice for electric and hybrid vehicles. But rapid demand growth and undiversified supply chains are presenting big challenges.

"We have recently made progress with three potential upstream partnerships — the Sarfartoq deposit in Greenland, which is a former Hudson Resources rare earth project; Yangibana, which is Australia-owned and operated by the current largest shareholder, Hastings Technology Metals, and Koppamurra in Australia, a heavy rare earth ionic clay deposit owned by Australian Rare Earths," chief executive Constantine Karayannopoulos said during a conference call for the company's third-quarter results.

The impact of price volatility was felt in the previous quarter when a steep rally in Chinese rare earth prices — which pushed Argus 99pc neodymium-praseodymium prices to $218.5-220/kg fob on 1 March from $107.5-109/kg fob China on 2 March 2021 — began to correct. Today, Argus assessed 99pc NdPr at $109-111/kg. The company describes this as lead-lag — when the cost of inventory and selling prices move in opposite directions. It can of course work both ways. Margins for the firm's magnet division, Magnequench, fell in the third quarter. Magnequench's earnings before interest, taxes, depreciation and amortization (ebitda) fell to $6.3mn in July-September, down from $9.7mn a year earlier. But this was partially offset by higher prices and margins for metals including hafnium and tantalum, where ebitda jumped to $6.6mn from $1.7mn in July-September 2021. Short-term price volatility effects should correct over time for an individual business but cannot provide the certainty that mass market supply chains need where business cycles and planning run into decades, Neo said.

Japan, the only country other than China with a large, high-performance rare earth magnet production base, has tackled this by going some way to protect customers from steep swings in rare earth prices. But in Europe and the US, the only solution may be fully integrated supply chains, industry observers said.

The final missing link

Historically, the industry outside China has focused on rare earth resources in the ground and projects to develop them. But in more recent years a slew of projects to create mid-stream processing capacity to produce carbonates and oxides have emerged as it became clear that mining alone was insufficient to develop the industry. But the final stage of the supply chain — magnet manufacturing — is still woefully under-resourced, with very few large advanced projects formally announced to date.

US-based MP Materials, which owns and operates the Mountain Pass light rare earth mine in California, is investing heavily in midstream, metal and magnet production. It has started commissioning a separation plant to convert rare earth ore concentrate into rare earth oxides and is simultaneously building metal and alloy-making capacity and magnet manufacturing capacity. It is targeting capacity of 1,000 t/yr of sintered neodymium iron boron magnets with alloy production expected to ramp up in 2023. This is enough to supply 500,000 EVs, the company estimates. MP concluded a binding offtake agreement with US carmaker GM in December. GM has also concluded a non-binding offtake agreement with European magnet maker Vacuumschmelze, which announced plans to build a rare earth magnet plant in the US, with a start date of 2024.

Neo's commitment to developing rare earth magnet capacity in Europe was underscored by an €18.7mn ($19.2mn) grant from the EU Just Transition Fund, which was awarded last week. Neo plans to develop metal, alloy and magnet making capacity in Estonia on the site of its 2,000 t/yr light rare earth separation plant. It is targeting a 2025 start date for Phase 1 capacity of 2,000 t/yr sintered NdFeB magnet blocks. Plans are under way to progress rapidly to Phase 2 capacity of 5,000 t/yr NdFeB blocks in response to strong demand from the European automotive sector.

By Caroline Messecar