Europe uses rare earths in products linked to 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 working to diversify supplies of strategic materials, while the EU Carbon Border Adjustment Mechanism (CBAM) does not currently charge imports of rare-earth products based solely on their emissions footprint. Supply-chain constraints also extend beyond mining to separation, refining, metal production and permanent-magnet manufacturing.
Weak points in separation, refining and magnet production can leave European manufacturers reliant on external suppliers even when alternative raw-material sources exist. Separation, refining and magnet production are therefore described as central steps for building a rare-earth supply chain in Europe. The concentration of processing capacity abroad is also cited as a factor complicating efforts to diversify supply.
EU rare-earth import dependence by supplier
Eurostat reported that EU imports of rare-earth elements increased by 17.1% in 2025 to approximately 15,100 tonnes. Measured 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 data are presented as evidence that the market volume is relatively small while remaining strategically important. Rare earths are used in products supporting electrification, industrial automation and advanced technologies. Reliable access is therefore described as relevant for several European manufacturing industries.
Concentrated supply is also linked to risks beyond price volatility. Disruption at processing facilities or changes in export conditions can affect manufacturers that have few alternative sources of qualified materials.
Separation, refining and permanent magnets as bottlenecks
Rare-earth processing involves complex chemical separation used to isolate individual elements from mixed materials. Additional processing produces metals and alloys, while permanent-magnet manufacturing relies on specialised technology and precise material specifications. These steps are described as energy-intensive and technologically demanding.
Imported rare-earth oxides and metals are stated to not face a CBAM obligation solely due to carbon intensity. As a result, European projects cannot use border-carbon adjustments to offset higher electricity costs, labour costs or environmental compliance costs tied to production.
Instead, developers are described as needing to compete through reliable feedstock availability, efficient processing technology, established customer relationships and secure energy access. Building the full value chain may require coordination among separation facilities, metal producers and magnet manufacturers.
The source also notes that automakers, wind-turbine manufacturers, defence companies and electronics producers may seek long-term supply agreements. Such contracts are described as a way to reduce dependence on concentrated processing capacity abroad and can provide greater revenue visibility when customers prioritise reliable deliveries and diversified sourcing.
Investment support under the Critical Raw Materials Act
The EU Critical Raw Materials Act (CRMA) is cited as a mechanism that can support strategic projects through policy recognition, improved permitting conditions and increased visibility for investment planning. However, strategic importance is described as not automatically translating into profitability for European facilities.
Facilities still need suitable feedstock and must meet demanding product specifications. They also need to compete with established international suppliers.
The source further links project bankability to long-term customer commitments rather than expectations of future CBAM protection changes. Projects are described as needing both processed materials for feedstock requirements and demand for their end products.
Recycling as an additional feedstock route
Recovering rare earths from discarded permanent magnets and complex electronic products is presented as another potential source of material for European processors. Recycling is described as potentially reducing dependence on primary extraction while keeping valuable materials within the European economy.
The recovery process is also described as technically challenging because rare earths can be embedded in complex products and mixed material streams. Collection, separation and processing must 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 than facilities focused only on one stage of processing.
Status of CBAM coverage for rare-earth products
The source states that extending CBAM to critical minerals would raise issues related to emissions accounting and product comparability. Carbon intensity can vary across mining, chemical separation and metal production stages. It also notes that processing capacity is already concentrated.
A future approach would need to account for different production routes without creating unintended obstacles to diversifying European supplies. For now, rare-earth projects are described as needing assessment under existing regulatory frameworks rather than assumptions that carbon-border coverage will expand.
The immediate priority is described as developing capabilities to process, refine and manufacture strategic materials closer to industrial customers. The rare-earth sector is characterised in the source as a supply-resilience challenge where carbon-border policy plays a secondary role compared with domestic processing expertise, recycling capacity, secure feedstock access and long-term demand from industries using these materials.