Finance
Exclusive-GKN cancels plans for magnet factory in setback for Europe's rare earth aims
Published by Global Banking & Finance Review®
Posted on February 27, 2026
4 min readLast updated: February 27, 2026
Quick Summary
GKN Powder Metallurgy has dropped its planned European rare-earth permanent magnet scale-up, underscoring how hard it remains for Europe to build a China-independent magnet supply chain despite EU 2030 benchmarks. The setback comes as Europe’s few operating/near-term projects—such as Neo’s Narva, Es
GKN scraps Europe rare earth magnet plant, complicating EU targets
By Eric Onstad
LONDON, Feb 27 (Reuters) - GKN Powder Metallurgy has scrapped plans to produce rare earth permanent magnets in Europe, three sources with knowledge of the matter said, highlighting the region's difficulty in creating a domestic rare earths industry to compete with dominant producer China.
China controls 90% of rare earth processed output and 70% of mining production. Europe has been criticised for lagging behind the U.S. in offering financial support for projects to develop its own supplies.
Europe’s rare earth magnet ambitions face a setback
GKN drops permanent magnet plans amid takeover and profitability concerns
The plans by GKN PM to make rare earth magnets - used in EVs, electronics and defence applications - were dropped late last year ahead of the finalisation of a takeover by a U.S. auto supplier because it was regarded as a non-core activity with an uncertain profit outlook, one of the sources said.
A second source said GKN was evaluating what to do with a pilot magnet plant it had built and was assessing options.
The sources declined to be identified because the information had not been made public.
GKN PM declined to comment.
HANDFUL OF MAGNET FACTORIES BEING PLANNED
Limited European capacity and ongoing competition with China
The proposed GKN PM magnet factory was among only a handful of such plants operating or being planned in Europe.
Neo Performance Materials last year launched output at its permanent magnet plant in Estonia and Germany's Vacuumschmelze produces magnets, but so far its main expansion plans are in the United States.
The company had spent 20 million euros on the project since announcing in 2022 plans to produce permanent magnets for EVs, the first source said.
GKN PM told Reuters in 2024 that it was operating a pilot plant in Germany and targeted commercial capacity of 4,000 metric tons of magnets by 2030. It had not selected a location for the commercial plant in Europe.
It had also hoped to establish a permanent magnet plant in North America.
An executive told Reuters at the time that the economics were uncertain due to low-cost competition from China and the plans depended on automotive and other customers willing to guarantee orders.
A web page dedicated to magnets on the GKN PM website has been removed.
Implications for EU Critical Raw Materials Act targets
The decision to scrap the plant will undermine the EU's plans to boost domestic production of critical minerals, which was criticised earlier this month by an internal audit report.
The EU's Critical Raw Materials Act in 2024 set targets that the EU should extract 10% of the minerals it requires by 2030, boost recycling capacity for those materials to 15% and be able to process 40% of its annual needs of each strategic raw material.
GKN WORKED WITH PARTNERS
Recycling and supply partnerships affected by the halt
GKN PM was working with Ionic Technologies, a start-up which has developed a new process to recycle permanent magnets, according to a statement by its parent Ionic Rare Earths in October.
GKN sent a letter to Ionic Technologies in December, informing them it was halting its work in magnets, but produced a batch of magnets for Ionic from its pilot plant before it closed down, a third source said.
Ionic declined to comment.
Automotive supply chain agreements and customer commitments
GKN PM had signed a memorandum of understanding in October 2023 to supply German auto parts supplier Schaeffler AG with permanent magnets.
Schaeffler declined to comment.
TAKEOVER FINALISED
Ownership change and strategic focus under the new group
Earlier this month, a $1.44 billion takeover was finalised of GKN PM and its parent, British auto parts supplier Dowlais Group, by Detroit-based automotive supplier American Axle & Manufacturing, which changed its name to Dauch Corp.
The takeover was announced about a year ago as the combined group aimed to benefit from greater scale as the auto industry grapples with volatile demand for electric vehicles, economic uncertainties and the global expansion of Chinese EV makers.
(Reporting by Eric Onstad; Editing by Veronica Brown and Barbara Lewis)
Key Takeaways
- •EU policy ambition vs. execution gap: the EU’s Critical Raw Materials Act sets 2030 benchmarks of ~10% extraction and ~40% processing capacity (plus other measures), but project economics and customer offtake remain key bottlenecks for magnets. (eur-lex.europa.eu)
- •Europe’s magnet buildout is still thin: Neo Performance Materials opened a rare-earth magnet facility in Narva, Estonia on Sept. 19, 2025 (about 2,000 t/yr initially, with plans to scale), highlighting that only a small number of plants are coming online even as demand rises. (neomaterials.com)
- •Ownership and strategic focus are shifting: American Axle completed its acquisition of Dowlais (parent of GKN PM) on Feb. 3, 2026, and rebranded to Dauch Corporation (effective Jan. 26, 2026), a backdrop that can reinforce ‘non-core’ prioritization decisions like exiting magnets. (stocktitan.net)
References
Frequently Asked Questions about Exclusive-GKN cancels plans for magnet factory in setback for Europe's rare earth aims
1Why did GKN Powder Metallurgy scrap its Europe rare earth magnet plans?
Sources said the plans were dropped late last year ahead of a takeover because magnets were seen as a non-core activity with an uncertain profit outlook and low-cost competition from China.
2What role does China play in rare earth supply in the article?
The article says China controls about 90% of rare earth processed output and around 70% of mining production.
3What capacity did GKN PM previously target for magnet production?
GKN PM told Reuters in 2024 it was operating a pilot plant in Germany and targeted commercial capacity of 4,000 metric tons of magnets by 2030.
4Which European companies are mentioned as producing or launching permanent magnet output?
Neo Performance Materials launched output at its permanent magnet plant in Estonia, and Germany's Vacuumschmelze produces magnets.
5How does the decision relate to the EU’s Critical Raw Materials Act targets?
The article says scrapping the plant undermines EU plans to boost domestic critical minerals production; the 2024 Act targets include extracting 10%, recycling 15%, and processing 40% of annual needs for each strategic raw material by 2030.
