I. Introduction: The "Industrial Vitamins" Choking Europe’s Industrial Throat
Rare earth elements—indispensable strategic resources for modern industry—are increasingly becoming the core source of Europe's geopolitical anxiety.
The data is cold, yet it speaks volumes: 98% of the magnetic products imported by the European Union within its supply chain originate from China, and Germany’s annual import value of rare earth-related products reaches as high as 70 billion euros. Between January and July 2025, China exported 11,476.77 metric tons of rare earth permanent magnets to Europe, accounting for 41% of China’s total global exports, with Germany alone accounting for 48% of Europe's total imports. In other words, the core industries underpinning Europe's future competitiveness—electric vehicle motors, wind turbine generators, and precision military guidance systems—have their raw material lifelines almost entirely tied to China.
China commands approximately 90% of the world's rare earth processing capacity and controls over 95% of the supply chain in the heavy rare earth separation segment. This is not simple trade dependence; it is a structural subjugation.
The EU is hardly indifferent to this reality. The Critical Raw Materials Act (CRMA) was enacted in 2023, setting ambitious targets for 2030 to achieve 10% domestic extraction, 40% domestic processing, and 25% domestic recycling. In 2025, the EU launched the "ReSourceEU Action Plan," pledging massive capital infusions to diversify the rare earth supply chain. France has emerged as the vanguard of this "rare earth independence movement," boasting nine strategic projects within its borders, the most of any EU member state.
Yet, the chasm between ideals and reality is becoming increasingly glaring.
This article systematically argues—from five dimensions: capacity, cost, technology, supply chain, and geopolitics—a conclusion that many in Europe are still reluctant to face: European rare earth industries cannot break away from China, at least not for the foreseeable future.
II. The Caremag Plant: An Expensive Strategic Illusion
Among the numerous European projects attempting to break China’s rare earth dominance, the Caremag plant perhaps best illustrates the rupture between "strategic autonomy" rhetoric and commercial reality. This project, hailed by some media outlets as the "world’s largest rare earth recycling plant," provides a vivid footnote to the premise that "European rare earth cannot leave China."
2.1 Project Overview: A Grand-Scale "Starting Line"
In March 2025, Caremag—a subsidiary of the French company Carester—officially broke ground in the Lacq industrial park in southwestern France. This project encapsulates the political ambitions of both France and Japan: a total investment of 216 million euros, of which 106 million euros in subsidies is provided by the French government via the "France Relance" and "France 2030" plans, while the Japanese government invests 110 million euros through JOGMEC and Iwatani Corporation.
The project is designed to process 2,000 metric tons of waste magnets and 5,000 metric tons of ore concentrates annually, targeting an output of approximately 1,400 metric tons of rare earth oxides, including 800 metric tons of light rare earths (neodymium, praseodymium) and 600 metric tons of heavy rare earths (dysprosium, terbium). The latter is claimed to account for 15% of global heavy rare earth production—a figure frequently cited by Western media, though its preconditions are rarely questioned.
Project promoters emphasize technological advantages: utilizing patented technologies to remove radioactive elements, achieving "zero liquid waste," and planning to use artificial intelligence to optimize production processes. European automakers such as Stellantis have signed long-term off-take agreements, while Japan has secured offtake rights for 50% of the heavy rare earth products.
2.2 Structural Flaws: Three "Fatal Weaknesses"
However, even Western media outlets supportive of European rare earth autonomy concede that the Caremag project suffers from three structural flaws.
- First, the "drop in the bucket" scale.An annual output of 1,400 metric tons is merely a symbolic supplement compared to the 16,000 metric tons of permanent magnets Europe imports from China every year. Meanwhile, China's total rare earth oxide production in 2025 exceeded 260,000 metric tons—meaning Caremag's output accounts for a mere 0.5% of China's total volume. The touted "15% of global heavy rare earths" is based on relatively sluggish current demand levels. Once electric vehicles and wind power expand massively and demand doubles, this proportion will shrink rapidly. This is not "replacing China," but rather "better than nothing."
- Second, insurmountable costs.This is Caremag’s most fatal vulnerability. According to assessments by multiple international institutions, the operating cost of a Western rare earth separation plant of equivalent scale is 4 to 5 times that of China. A comment by Professor Lin Boqiang of Xiamen University hit the nail on the head: "Western plants run at a loss the moment they start production, because subsidies cannot cover daily operations."
The EU's stringent environmental regulations are a double-edged sword: while they guarantee environmental standards, they drive up production costs. Caremag’s investments in wastewater treatment and exhaust gas management are estimated to account for nearly 40% of total operating costs. In contrast, Chinese enterprises compress unit costs to the extreme by spreading identical compliance costs across hundreds of thousands of tons of output.
More critically, the balance of technological patents is severely skewed. China holds over 70% of global patents in rare earth separation, with the China Rare Earth Group adding over 400 new heavy rare earth-related patents in 2025. Core processes—such as extractant formulations, stage optimization, and closed-loop wastewater recycling—have undergone four decades of Chinese iteration, forming a deep intellectual property moat. The last time Europe mastered the complete heavy rare earth separation process was during the Rhône-Poulenc era; that technical know-how has long been lost, leaving a thirty-year talent vacuum. - Third, "cooking a meal without rice" on the raw material front.This is the most fundamental strategic paradox. Caremag requires 5,000 metric tons of ore concentrate annually, yet over 95% of the world's heavy rare earth concentrates originate from southern China's ion-adsorption deposits. Even if the plant is completed and operational, any slight restriction by China on the raw material front could cause the production line to stall.
The recycling pipeline faces similar dilemmas: Europe's annual collection of waste permanent magnets currently falls short of 1,000 metric tons, far below the design load of 2,000 metric tons. The service life of electric vehicle motors and wind power equipment spans 10 to 15 years; a true large-scale decommissioning wave will not arrive until at least after 2030. France’s domestic recycling system remains in a pilot stage, lacking mandatory recycling regulations, and a large volume of old magnets is still simply landfilled or exported.
Although Caremag has signed a 10-year supply agreement with Brazil Rare Earths, the scale, grade, and stability of Brazilian supplies remain to be verified. Transport routes themselves constitute a part of geopolitical risk.
Caremag's predicament reveals a profound reality: any attempt to achieve "de-China-ification" in a single segment of the supply chain is bound to fall into the awkward dilemma of "raw materials still in China, technology still in China, and costs vastly higher than China."
III. Other "Shipwrecks" Across the European Rare Earth Landscape
Caremag is far from an isolated case. Other projects in Europe’s rare earth autonomy drive are encountering similar predicaments.
3.1 Britain's Pensana Plant: "Abortion" Amid Policy Vacuums
In October 2025, British-listed mining firm Pensana announced the abandonment of its planned £250 million rare earth oxide separation plant project at the Saltend Freeport in Hull. The project was originally intended to process praseodymium-neodymium resources from the Longonjo mine in Angola to serve Europe's electric vehicle and wind power industries.
The reason for abandonment is deeply ironic: the United States pledged to purchase rare earths from its Mountain Pass mine at guaranteed floor prices, whereas European governments provided no comparable support. Pensana Chairman Paul Atherley candidly admitted that this was the decisive factor terminating the project.
This implies that even commercially viable projects will be abandoned by European enterprises if they lack government-backed "safety nets." This exposes Europe's institutional shortcomings in attracting rare earth investments—while the US utilizes the Defense Production Act for price guarantees and subsidies, and China relies on state-level industrial policies, the EU’s Critical Raw Materials Act remains sluggish in execution.
3.2 France's MagREEsource: "Soaring Demand, Lagging Capacity"
Erick Petit, CEO of Grenoble-based recycled magnet manufacturer MagREEsource, expressed a sentiment with broad representative weight: "It is deeply frustrating because demand is booming, but we simply lack the sufficient capacity to respond."
The company hopes to achieve an annual output of 1,000 metric tons of magnets by 2027, but Europe imports 16,000 metric tons of magnets from China annually—making this domestic output minuscule by comparison. Even after raising 200 million euros from the investment community and public funds, Petit still complains about insufficient policy support, while urging customers "to be willing to pay a premium for locally manufactured permanent magnets."
"Willing to pay a premium"—these five words expose the fundamental economic barrier to Europe's rare earth independence. In the face of Chinese products that are both superior in quality and cost-effective, demanding that downstream enterprises pay extra costs for "Made in Europe" is essentially using administrative means to counter market laws. Without sustained government subsidies or mandatory procurement policies, this model is unsustainable.
3.3 Sweden's LKAB: The "Fourfold Pain" of Cost Disparities
Swedish mining giant LKAB planned to extract rare earths from iron ore waste at the Kiruna mine, an innovative technological route. However, according to industry evaluations, its refining costs are four times higher than those of Chinese primary ores, drawing boycotts from clients like BMW and Siemens.
European automakers' stance is unequivocal: under intense market competition, they cannot absorb a fourfold cost premium. As long as Chinese materials are "cheaper and better," European producers stand zero chance of winning. This assessment comes from Tobias Gehrke, a senior policy fellow at the European Council on Foreign Relations, whose conclusions carry substantial authority.
3.4 The Solvay Plant: Historical Heritage and Real-World Bottlenecks
Belgian chemical giant Solvay’s plant in La Rochelle, operational since 1948, was once the pride of Europe’s rare earth industry. The plant has now announced plans to restart heavy and light rare earth oxide production using non-Chinese sources of ore. However, this "surviving veteran" faces capacity bottlenecks—unable to expand production due to wastewater discharge restrictions, it targets meeting 30% of Europe's demand for magnetic rare earths by 2030.
The "30% target" implies that even under the most optimistic projections, Europe will remain at least 70% dependent on imports.
IV. Why "Leaving China is Impossible": Fivefold Barriers
The aforementioned cases reveal five structural barriers facing Europe's rare earth autonomy process. These barriers overlap, making "de-China-ification" virtually impossible for the foreseeable future.
4.1 The Production Barrier: An "Astronomical Gap" in Manufacturing Capacity
China's total rare earth oxide production in 2025 exceeded 260,000 metric tons. All of Europe's current separation projects under construction, planning, or operation—including Caremag, Solvay, and REEtec—combined have a planned capacity totaling less than 5% of China's annual output.
This is not a mere gap; it is a "generational divide." Executives from multiple international mining companies have openly admitted that without Chinese technological cooperation, building an independent plant takes at least 15 years, with prohibitive capital costs.
4.2 The Cost Barrier: "Insurmountable" Price Competitiveness
China's rare earth processing costs are only one-third of those in Europe and the US. This gap cannot be explained by clichés such as "low labor costs" or "lax environmental standards"—though minor factors exist—but rather stems from a comprehensive advantage across four dimensions:
- Economies of scale: A single Chinese separation plant can match the total capacity of multiple European projects.
- Technological accumulation: Process optimizations refined through four decades of iteration have driven extraction efficiency, stage control, and recycling to their limits.
- Complete industrial chain: "One-stop" supply chains spanning mining, separation, metallization, and magnet manufacturing minimize logistics and loss costs.
- Policy synergy: National-level industrial planning and financial support forge systemic competitiveness.
Recent reports by Western think tanks concede: "As long as European industries can purchase cheaper materials from China, other producers stand no chance." This sentence lays bare the underlying reality.
4.3 The Technological Barrier: Patent Walls and Knowledge Interruption
China holds over 70% of global patents in rare earth separation. China’s technological blockade is also escalating—in 2025, the China Rare Earth Group added over 400 new heavy rare earth-related patents, placing 37 core processes, including grain boundary diffusion technology, under confidential classification.
Europe faces a twofold dilemma: on one hand, it cannot obtain authorization for China’s latest technologies; on the other hand, it suffers from a thirty-year knowledge interruption of its own. The last time Europe fully mastered the complete heavy rare earth separation workflow was during the Rhône-Poulenc era of the 1980s; relevant technical documentation, operating procedures, and engineering experiences have long been lost. Although Carester boasts a team of experts from the Rhodia era, industrial experience is ultimately limited—the chasm between "laboratory results" and "industrial-grade production lines" is consistently severely underestimated.
4.4 The Raw Material Barrier: Inescapable Upstream Control by China
This is the most fundamental structural constraint. Over 95% of global heavy rare earth concentrates originate from southern China’s ion-adsorption deposits. Europe lacks domestic rare earth mines—while the EU’s REEsilience project screened 149 global deposits and identified Norway's Fenne deposit (8.8 million tons of reserves) and Sweden's Kiruna mine as premium resources, environmental impact assessment procedures require 10 to 15 years, driving up costs by 30% to 50%. Norway’s Fenne mine is scheduled for production by 2030, and Sweden’s Kiruna mine may be delayed until after 2035.
Until then, the "ore pipeline" for European projects like Caremag remains heavily dependent on Chinese supplies. The moment China imposes export controls, raw material channels face immediate crisis. This is the strategic paradox of "building a plant to decouple from China, while its raw materials remain in Chinese hands."
4.5 The Industrial Chain Barrier: The "Last Mile" from Oxides to Magnets
Even if Caremag successfully yields four types of rare earth oxides, Europe's difficulties are far from over. Rare earth oxides are merely intermediate products, whereas downstream manufacturing of high-performance sintered magnets remains heavily concentrated in China—magnet production capacities in regions like Ningbo, Baotou, and Ganzhou account for over 80% of the global total, leaving Western magnet plants with total capacities under 10% of China's.
This breeds an absurdly paradoxical possibility: rare earth oxides produced in Europe may ultimately need to be shipped to China for processing into magnets, and then resold back to Europe. This "European production, Chinese processing, European consumption" chain not only fails to reduce dependence on China, but actually adds a layer of transportation and tariff costs.
Canada-based Neo’s 2,000-ton-per-year capacity plant in Estonia—Europe's sole domestic magnet manufacturer—delayed its commercial deliveries from 2026 to 2028 due to a lack of heavy rare earth separation capabilities and a reliance on Chinese dysprosium and terbium raw materials.
V. The Geopolitical Dimension: Europe's Strategic Misjudgments
Viewed through a geopolitical lens, Europe's rare earth strategy suffers from at least three major misjudgments.
Misjudgment 1: Equating "Production Capacity" with "Supply Chain Security"
What Europe lacks is not one or two factories, but a complete industrial ecosystem spanning mining, separation, metallization, magnet manufacturing, and recycling. China spent four decades building this ecosystem, and Western attempts to replicate it within a few years using a handful of projects and billions of euros amount to climbing a tree to catch fish.
The EU demands 40% domestic processing and a 25% recycling rate by 2030, but recent assessments by multiple Western think tanks concede that European domestic refining capacity will account for at most 5% of the global total by 2030, falling far short of its goals.
Misjudgment 2: Underestimating China's Countermeasure Capabilities
Following China's implementation of export controls on seven categories of medium and heavy rare earths in April 2025, European enterprises immediately faced supply tightness. The European Association of Automotive Suppliers reported that out of 140 license applications, only a quarter were approved, forcing multiple plants to shut down production lines.
Even after China raised approval rates to 60% in June 2025, European enterprises continue to endure the anxiety of supply unpredictability. The European Union Chamber of Commerce in China confirmed that European firms experienced seven production disruptions in August 2025, with an estimated 46 further shutdown risks expected that month.
Misjudgment 3: Overestimating Intra-Western Coordination Efficiency
Following Brexit, the UK shifted toward the US-led Minerals Security Partnership; German automakers accelerated procurement of Chinese magnets via "green channels," undercutting the EU’s negotiating posture; France’s push for a "European Rare Earth Alliance" failed to make effective headway due to changes in government. This fractured fragmentation leaves Europe incapable of forming a unified negotiating leverage against China.
VI. Conclusions and Policy Recommendations
6.1 Core Conclusions
Synthesizing the analysis above, this article draws the following conclusions:
- First, European rare earths cannot leave China in the foreseeable future. This is not a political choice, but an objective reality dictated by a triple structural constraint of economics, technology, and resources. Europe cannot overcome in the short term the "fivefold barriers" constructed by China across production, cost, technology, raw materials, and the industrial chain.
- Second, the costs of "de-China-ification" far exceed expectations. The input-output ratios of projects like Caremag give pause for thought—216 million euros yields an annual output of 1,400 metric tons, whereas Europe imports over 11,000 metric tons of permanent magnets from China annually. France’s domestic magnet recycler MagREEsource possesses a 1,000-ton annual capacity, similarly acting as a drop in the ocean. Expensive "strategic autonomy" is turning into a bottomless pit devouring public finances.
- Third, the trajectory of pursuing strategic autonomy may have deviated. Rather than competing head-on with China in segments where Europe lacks comparative advantages (such as separation and extraction), limited resources should be concentrated in more feasible fields—such as building recycling systems, R&D for magnet substitute technologies, and establishing stable supply-guarantee mechanisms with China.
- Fourth, Europe needs to re-examine the basic assumptions of its rare earth strategy. The narrative that "China will weaponize rare earths" overestimates China's willingness to proactively sever supply chains while underestimating the economic interdependence between Europe and China. China's advantage in rare earths stems from "competitiveness" rather than "monopoly," which in itself should not serve as grounds for confrontation.
6.2 Policy Recommendations
Based on the foregoing analysis, this article puts forward the following recommendations:
- First, adjust strategic objectives and lower "autonomy" expectations. Shift the objective from "ridding oneself of dependence on China" to "mitigating concentration risks"—establishing minimum buffer stocks and backup capacities in critical categories rather than pursuing total substitution.
- Second, concentrate resources on developing recycling systems. Europe possesses certain technological and institutional advantages in the recycling segment. Current European rare earth recycling rates fall below 1%, yet the EU has planned restrictions on permanent magnet waste exports to prioritize domestic recovery. Establishing EU-wide mandatory recycling regulations, deposit systems, and "product passport" systems represents a pragmatic and relatively efficient choice.
- Third, prioritize downstream investments over upstream ones. Instead of competing with China in the separation segment, focus on developing magnet manufacturing and terminal application technologies—improving rare earth utilization efficiency, developing reduction-substitution technologies, and driving innovations in magnet design.
- Fourth, establish stable supply mechanisms with China. Maintaining dialogue with China and establishing stable supply mechanisms is vastly more viable than unilateral "decoupling." China has demonstrated a willingness to accelerate the review and approval of compliance applications; the key lies in establishing predictable, institutionalized channels.
- Fifth, pragmatically evaluate ongoing investments in projects like Caremag. Since sunk costs have already been incurred, the economic rationale for pouring in further capital should be prudently assessed. If economic viability cannot be improved, these projects should be positioned as strategic reserve capacities rather than aiming for full-load commercial operations.
Conclusion
The rare earth issue touches multiple nerves across Europe's energy transition, industrial competition, and strategic autonomy. The Caremag plant is a product born of this anxiety—it has successfully garnered sufficient political attention and resource backing, yet suffers from fundamental flaws on economic and technological levels.
This is not the outcome of rational strategic planning, but rather a political decision driven by a sense of crisis. What Europe requires is a calm, pragmatic, and reality-grounded supply chain strategy, rather than emotion-driven, input-output imbalanced "strategic vanity projects."
"De-China-ification" sounds rousing, but in the highly complex and concentrated strategic domain of rare earths, its costs far exceed the imaginations of most European decision-makers. Acknowledging that "leaving China is impossible" is not a sign of weakness, but an embodiment of strategic rationality. Only by confronting this reality can Europe formulate truly effective policies on the rare earth issue.