Schaeffler, Germany's fifth-largest parts supplier, announced this week that it had signed a five-year rare earth supply agreement with REEtec, a Norwegian rare earth separation company.

The agreement is also the first time that European car suppliers or manufacturers have purchased rare earths from Europe. As the fifth largest auto parts manufacturer in Germany, Schaeffler itself is a leader in the bearing field, supplying components to Volkswagen, General Motors, Toyota and other automakers.

According to Andreas Schick, chief operating officer of Schaeffler, the company's supply agreement with REEtec will begin in 2024. At present, the company is rapidly transforming into an electric car supplier, so rare earths can not only rely on the industry-standard supply chain, but also need local suppliers from Europe.

In recent years, automakers have repeatedly extended their hands to upstream miners, especially battery materials such as lithium and nickel, but they have not done much in the rare earth sector. At present, the European Union, the United Kingdom and the United States are all eager to establish local rare earth and magnet supply chains. According to media statistics, 98% of the permanent magnets needed in the European market are imported from Chinese suppliers.

It needs to be explained that the rare earth material itself is not rare, but the treatment process is very complex and will produce toxic waste. Manufacturers need to separate the ore into 17 separate elements, which are then used to produce a range of alloys for electronics and electric cars.

The main selling point of Swedish REEtec is that the production line consumes less energy and that almost all chemicals used for processing are recycled and reused. The company launched a showcase plant in 2019, and locking in the new contract will help the company build a commercial separation facility that produces raw materials from Vital Metals of Canada.

But what neither Schaeffler nor REEtec made clear is how many rare earths the agreement will supply and how much it will cost. Schick did not answer this question directly, saying only that it was a challenge from a business point of view, but it was the company's commitment to sustainability.

Schaeffler's electric travel business received a total of 3.2 billion euros last year, far higher than the earlier estimate of 15-2 billion euros, with nearly 1/3 of the orders coming from the automotive technology division, according to the financial report.