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European Groups Hit By Magnesium Output Curbs In China

Chinese government’s efforts to curb domestic power consumption restrict supply, threatening industrial production and closure of auto plants.


An aluminium component of the Volkswagen Tiguan car in a production line at the Volkswagen headquarters in Wolfsburg, Germany. Photo: Reuters

 

European trade associations warned on Friday that they will soon run out of magnesium supplies from China – which threaten the closure of production lines for cars and other industrial products.

The groups said in a joint statement that due to the Chinese government’s efforts to curb domestic power consumption, supply of magnesium has either been halted or reduced drastically since September, “resulting in an international supply crisis of unprecedented magnitude”.

With an 87% production share, China has a near-monopoly on global magnesium manufacturing. Much of the world’s industrial magnesium comes from Yulin in Shaanxi province.

The local government has ordered most magnesium smelters to close until the end of the year and told the rest to cut production by half to hit energy consumption targets.

Europe depends on China for 95% of its supply. The last European magnesium production facility closed in 2001 as a consequence of dumped Chinese imports, the trade groups said.

 

Record Prices

According to the International Magnesium Association, magnesium is found in natural minerals such as dolomite and magnesite. It can also be found in seawater and in salt lakes or underground mineral salt deposits.

The trade groups said magnesium had reached record prices of up to $14,000 per tonne, up from $2,000 per tonne earlier this year. “There are no substitutes for magnesium in aluminium sheet and billet production,” Amos Fletcher, a Barclays analyst, wrote in a recent report.

He said 35% of downstream demand for magnesium is used in vehicle production. “So if magnesium supply stops, the entire auto industry will potentially be forced to stop.”

Manufacturers have signalled alarm over the shortage. This month, Matalco, a Canadian maker of sheet metal, said magnesium availability has dried up.

“We have not been able to purchase our required magnesium units for all of 2022,” Tom Horter, Matalco chief executive, wrote in a letter, according to a S&P Global Platts report.

The trade groups called on the European Union to “urgently work towards immediate actions” with their Chinese counterparts to “mitigate the short-term, critical shortage issue as well as the longer-term supply effects on European industries”.

The letter was jointly issued by European Aluminium, Eurofer, ACEA, Eurometaux, industriAll, ECCA, ESTAL, IMA, EUWA, EuroAlliages, CLEPA and Metals Packaging Europe.

 

• By George Russell.

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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