European automakers are teaming up with Australian rare-earth explorer Arafura Resources Ltd., amid the wave of electrification. Negotiations on direct supply of rare earth raw materials.
Arafura is developing a A $1 billion ($728 million) Nolan rare earths project in Australia, which is expected to meet 10 percent of global demand for rare earths. Arafura plans to process rare earth ore near its site, ensuring direct oversight of toxic waste disposal for the project.
"We have been in contact with European [car] manufacturers about direct feedstock supplies," Peter Sherrington, Arafura's chief financial officer, said in a recent interview. He noted that he expected a deal by the end of the year because negotiations were moving towards supply and price.
Rare earth materials, whether permanent magnet motors or rare earth power batteries, are playing an increasingly important role in the electrification of cars, and their prices continue to rise. China is the world's largest producer of rare earths, responsible for two-thirds of global mining and 85 per cent of refined products.
While carmakers including BMW and GENERAL Motors are trying to reduce their use of rare earths -- the average car consumes 3kg (6.6lb) of rare earths -- switching to alternative materials often reduces engine efficiency. Tesla initially used magnetic-free induction motors (a.C. asynchronous motors) to power its electric cars, but has reverted to permanent magnets in the Model 3.
Carmakers such as BMW, Volkswagen and Tesla are increasingly keen to source rare earth materials directly from miners because of their importance.
Europe is also trying to build supply chain networks. Currently, Europe is one of the major markets for electric vehicles and is expected to become the world's largest consumer region for electric vehicles. The EU last year set up the European Raw Materials Union (ERMA) to help ensure adequate supplies of key raw materials. In rare earths, the industry alliance has identified 14 projects in Europe for 1.7 billion euros ($2 billion).
"There has always been this sense of dependency that [raw materials] are available at [the right] price," says Bernd Schaefer, ERMA's chief executive. "But now people are realising that there are huge costs associated with not having raw materials."
Sherrington, Arafura's chief financial officer, said Germany's new supply chain law also caught the industry's attention. Starting in 2023, companies will be required to ensure that environmental pollution or human rights violations do not occur in their supply chains, according to the regulation.
