Highlights

• Neo Performance Materials opens first European rare-earth magnet factory in Narva, Estonia
• Addresses critical supply chain gaps
• The plant will produce 2,000 tons of neodymium magnets annually
• Production is enough for one million electric vehicles
• Major automakers have already secured contracts
• Represents a strategic move to reduce dependence on Chinese rare earth magnet production
• Strengthens Western supply chains

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Executives from Europe’s automakers traveled to Narva, Estonia last week to mark the opening of what is being called the most important critical materials project in Europe today. Neo Performance Materials (opens in a new tab), a Canadian company, has completed a $75 million rare-earth magnet plant on the edge of the Russian border, offering the continent its first serious foothold in a market long dominated by China.

A Magnet for Automakers

The facility, opened Friday with Estonian Prime Minister Kristen Michal in attendance, will produce 2,000 tons of neodymium magnets annually — enough for traction motors in roughly one million EVs. Bosch, the world’s largest auto parts supplier, has already reserved a significant share under a multi-year memorandum of understanding. Other major players, including General Motors, Robert Bosch GmbH, Schaeffler AG, and Mahle GmbH, sent representatives to secure access.

Demand is far greater than supply. Europe consumes about 20,000 tons of magnets per year for EVs alone, leaving Neo’s initial output covering just a fraction. Still, analyst Marvin Wolff of Paradigm Capital was blunt: “With the exception of Neo, there is no EV traction motor magnet manufacturing capacity in the West.”

Timing and Context

Neo’s decision to build in Narva was taken in late 2022, amid the economic fallout from Russia’s invasion of Ukraine. Construction finished on time and on budget in under 500 days — an impressive feat for a project of this scale. The ribbon-cutting came just months after China, which controls more than 90% of magnet supply, weaponized exports in response to tariff hikes by the United States. The EU Chamber of Commerce in China (opens in a new tab) recently counted seven production stoppages in Europe tied to shortages in August, with dozens more forecast for September.

The urgency is clear: rare earth magnets are not just for cars. They are also critical for smartphones, wind turbines, and fighter jets. Earlier this year, Ford was forced to idle its Explorer SUV plant in Chicago for a week when supplies ran short.

Expansion and Competition

Neo has signed multiple five- to seven-year contracts in the $50–100 million range, with deliveries to begin in 2026. The company plans to triple Narva’s capacity in 2027, sourcing raw materials from Australia to insulate supply chains from China. Meanwhile, U.S. projects led by MP Materials, USA Rare Earths, and Noveon Magnetics are ramping up. MP Materials’ Pentagon-backed Texas plant will exceed Neo’s initial capacity, but Neo’s first-mover status matters. “Everyone else is making promises. We built it,” CEO Rahim Suleman remarked.

Strategic Symbolism

The factory’s significance reaches beyond tonnage. At a G7 meeting in Canada this summer, European Commission President Ursula von der Leyen and Canadian Prime Minister Mark Carney passed around magnets from the plant as proof that Western supply chains are beginning to stand on their own.

Whether Europe can scale quickly enough remains uncertain — especially as its 2035 combustion engine ban nears and Chinese EV competition intensifies. But for now, Estonia’s magnet plant stands as a tangible counterweight to Beijing’s leverage, anchoring Europe’s rare earths strategy in concrete, not just policy papers.

Source: “EV makers line up at Europe’s only rare-earths magnets site,” The Detroit Times, September 19, 2025.

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