Mon. Nov 29th, 2021

China’s state-run tabloid Global Times says it is “unrealistic” for China to meet the urgent demand for magnesium from Europe, where stocks of raw materials could run dry next month.

The newspaper said the magnesium deficiency was not a simple problem that could be solved by increasing production from China.

“China’s efforts to tackle these challenges at its own pace are responsible and should be respected.

“It is important to establish an economic and trade consultation mechanism on the supply chain between China and the EU [European Union]. “

The European market is almost entirely (95%) dependent on China for the supply of magnesium, a key ingredient in aluminum, which is used, among other things, in the manufacture of cars and in building materials. Magnesium is also used in iron and steel production.

‘Catastrophic consequences’ of ‘supply crisis’

Flag of the European Union against a cloudy blue sky.
Industry groups warn against the catastrophic impact of China’s shortage of magnesium supply.(Flickr)

Last Friday, a dozen industry groups issued a joint statement urging European leaders to work towards immediate action with their Chinese counterparts to alleviate the critical shortage problem.

“The supply of magnesium from China has either been halted or drastically reduced since September 2021, which has resulted in an unprecedented international supply crisis,” they said.

The remaining magnesium stocks in Europe traded at $ 10,000-$ 14,000 per tonne. tons, up from about 2,000 USD per. tons earlier this year, industry groups said.

The European Commission has reportedly been in talks with China to address the shortcoming.

“Europe has no supply of its own and is dependent on China for imports,” analysts at investment bank Morgan Stanley said.

“With limited vessel availability and shipping times of at least two months, Europe can see limited supply until May.”

Although the United States is less dependent on China for magnesium, its aluminum producers face a similar supply problem.

The largest U.S. aluminum ticket producer, Matalco, has warned of an upcoming production cut, while the largest U.S. crude aluminum producer, Alcoa, has expressed concern about magnesium deficiency, Bloomberg reported.

Why has China’s magnesium production fallen?

A man eats a bowl of noodles in a dark room, using only his phone light to illuminate what is in the bowl
China struggled with a severe shortage of electricity that has left millions of homes and businesses affected by power outages.(AP: Olivia Zhang)

China produces about 87 percent of the world’s magnesium, but it has been affected by the country’s recent power crisis.

The Chinese government has tried to limit domestic electricity consumption and regulate sky-high electricity prices.

Many magnesium factories have either been shut down or halved their production capacity due to power outages.

Chinese state media have reported that China’s magnesium exports are likely to fall by 10 percent this year.

“Magnesium production is the latest victim of China’s power crisis as well as the government’s increasingly tough approach to emission reduction,” Peter Cai, a China analyst at the Lowy Institute, told ABC.

China is still one of the world’s largest CO2 emitters, but President Xi Jinping aims for the country’s CO2 emissions to peak before 2030 and to achieve CO2 neutrality by 2060.

Which products will the magnesium deficiency affect?

A magnesium deficiency can have widespread consequences across cars, aerospace, iron or steel, chemicals, beer and soft drinks and consumables.

Morgan Stanley analysts noted that many lightweight alloys were dependent on magnesium.

“The light weight and reinforcing properties of magnesium make it important for aluminum alloys (eg plate used in cars, beverage cans),” they wrote.

“It is also used for die casting of auto parts, as a desulfurizing agent in steel, for the production of ductile iron, in chemicals and more.”

While analysts noted that there had been some recovery in production in October, utilization was limited to 40 percent of capacity, and it still posed a major challenge to the global market.

Car manufacturers will be hit particularly hard as they are still struggling with a shortage of computer chips.

“Autos is an important end market for magnesium, both via aluminum alloy and directly, creating another challenge for production on top of the existing disruption from chip shortages, particularly in Europe and Japan, where magnesium is mostly imported,” says Morgan Stanley’s analysis.

“Depressed car production levels have masked the extent of the impact of the existing shortage; it may not be possible for car production to recover, as forecasters like IHS expect.”


Leave a Reply

Your email address will not be published. Required fields are marked *