Europe uses rare earths in products supporting renewable energy, electric mobility, advanced electronics and defence. Much of the world’s processing capacity for these materials is located outside the European Union. The EU is seeking to diversify supplies of strategic materials, while the EU Carbon Border Adjustment Mechanism (CBAM) does not currently charge imports of rare-earth products solely due to their emissions footprint. Supply-chain constraints also extend beyond mining to separation, refining, metal production and permanent-magnet manufacturing.
Weaknesses in separation, refining and magnet production can leave European manufacturers dependent on external suppliers even when alternative raw-material sources exist. Separation, refining and magnet production are therefore described as central to building a rare-earth supply chain in Europe. The concentration of processing capacity abroad is cited as a factor that complicates efforts to diversify supply.
EU rare-earth import volumes and sourcing concentration
Eurostat reported that EU imports of rare-earth elements rose by 17.1% in 2025 to approximately 15,100 tonnes. By weight, China supplied 46.8% of imports, followed by Russia at 25.9% and Malaysia at 23.1%. In the broader Eurostat import grouping measured by value, China was also the largest supplier.
The reported figures are linked to the strategic importance of a relatively small-volume market for European industry. Rare earths are used in products supporting electrification, industrial automation and advanced technologies. Concentrated supply is described as creating risks beyond price volatility, including disruption at processing facilities or changes in export conditions affecting manufacturers with few alternative sources of qualified materials.
Separation, refining and magnet manufacturing as bottlenecks
Rare-earth processing is described as requiring complex chemical separation to isolate individual elements from mixed materials. Further processing produces metals and alloys, while permanent-magnet manufacturing depends on specialised technology and precise material specifications. These steps are characterised as energy-intensive and technologically demanding.
Imported rare-earth oxides and metals are stated as not facing a CBAM obligation solely because of their carbon intensity. As a result, European projects cannot use border-carbon adjustments to offset higher electricity, labour or environmental compliance costs. Developers are instead described as competing through reliable feedstock, efficient processing technology, strong customer relationships and secure energy access.
Building a full value chain is described as requiring coordination among separation facilities, metal producers and magnet manufacturers. Automakers, wind-turbine manufacturers, defence companies and electronics producers may seek long-term supply agreements aimed at reducing dependence on concentrated processing capacity abroad. Such contracts are described as potentially improving revenue visibility when customers value reliable deliveries and diversified sourcing.
Investment support under the Critical Raw Materials Act
The EU Critical Raw Materials Act (CRMA) is described as able to support strategic projects through policy recognition, improved permitting conditions and greater visibility for investment planning. However, strategic importance is stated not to automatically ensure profitability. European facilities still need suitable feedstock, must meet demanding product specifications and have to compete with established international suppliers.
Long-term customer commitments are described as potentially mattering more for project bankability than expectations of future CBAM protection. Projects are described as needing both the materials required for processing and demand for their products. Reliable supply agreements are cited as a way to provide revenue visibility for new facilities.
Recycling options for additional feedstock
Recovering rare earths from discarded permanent magnets and complex electronic products is described as another potential source of material for European processors. Recycling is cited as potentially reducing dependence on primary extraction and helping keep valuable materials within the European economy. Recovery is also described as technically challenging because rare earths can be embedded in complex products and mixed material streams.
Collection, separation and processing are described as needing to be organised to provide enough suitable feedstock at commercially viable costs. Projects combining primary and recycled feedstock with separation technology and established magnet customers are described as potentially better positioned to develop resilient supply chains than facilities focused on only one processing stage.
CBAM expansion questions for critical minerals
The text states that extending CBAM to critical minerals would raise questions about emissions accounting and product comparability. Carbon intensity is described as differing across mining, chemical separation and metal production, while processing capacity is already concentrated abroad. Any future approach would need to account for different production routes without creating unintended obstacles to diversifying European supplies.
For now, rare-earth projects are stated to be assessed under the existing regulatory framework rather than assumptions that carbon-border coverage will expand. The immediate priority is described as developing capabilities needed to process, refine and manufacture strategic materials closer to industrial customers. The sector is characterised as reflecting a supply-resilience challenge where carbon-border policy plays a secondary role compared with building domestic capacity through processing expertise, recycling, secure feedstock and long-term demand from industries using these materials.