Rare earth magnets are a type of magnet made from alloys of rare earth elements, which are a set of metals that are found in the earth's crust in small quantities. These magnets are extremely strong and have many important applications in a range of technologies, including wind turbines, electric vehicles, smartphones, and computer hard drives.

The European Union (EU) imports around 16,000 tonnes per year of rare earth magnets from China, accounting for around 98% of the bloc's needs. This contrasts with just 1,000 tonnes of domestic production. A report by the European Raw Materials Alliance outlines that domestic competition is hamstrung due to a lack of supply chain diversification, transparency, industrial capacity, and strategic investments. The statistics and focus of the report are on neodymium rare earth permanent magnets, also known as Nd-Fe-B for their elemental composition. Another type of rare earth permanent magnet is samarium-cobalt.

The dependence on imports for such a critical component highlights the need for the EU to diversify its sources of rare earth magnets and to develop its own domestic production capabilities or shift import reliance to other sources in an effort to diversify, as this reliance on China for rare earth magnets also exposes the EU to potential supply chain disruptions and price fluctuations, which can have significant economic consequences. In September 2022, the European Commission announced the Critical Raw Materials Act, which outlines the bloc’s efforts to ensuring a “strong and sustainable level playing field” as well as “more resilient supply chains” within a “European network” that diversifies away from a strong reliance on China with respect to such crucial materials.