China says West must respect its ‘own pace’ as Europe and US face magnesium supply crisis – Community News
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China says West must respect its ‘own pace’ as Europe and US face magnesium supply crisis

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

The paper said the magnesium deficiency was not an easy problem that could be solved by increasing production from China.

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

“It is essential 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 percent) dependent on China for the supply of magnesium, an important ingredient in aluminum used in cars and construction materials, among other things. Magnesium is also used in the production of iron and steel.

‘Catastrophic impact’ of ‘supply crisis’

Flag of the European Union against a cloudy blue sky.
Industry groups warn of the catastrophic consequences of China’s magnesium deficiency.(flickr)

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

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

Remaining magnesium stocks in Europe traded at $10,000-$US14,000 a ton, up from about $2,000 a ton earlier this year, the industry groups said.

The European Commission is reportedly in talks with China to resolve the deficit.

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

“With limited vessel availability and delivery times of at least two months, Europe could see limited supplies until May.”

While the US is less dependent on China for magnesium, aluminum producers face a similar supply problem.

The largest US producer of aluminum billets, Matalco, has warned of an imminent production cut, while the largest US producer of raw aluminum, Alcoa, has expressed concerns about magnesium scarcity, Bloomberg reported.

Why has magnesium production in China fallen?

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

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

The Chinese government has tried to curb domestic power consumption and regulate rising electricity prices.

Many magnesium plants have been closed or cut in half due to the 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 and the government’s increasingly tough approach to cut emissions,” Peter Cai, a China analyst at the Lowy Institute, told the ABC.

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

Which goods will the magnesium deficiency affect?

A magnesium deficiency can have widespread effects on automobiles, aerospace, iron or steel, chemicals, beer and soft drinks, and consumer goods.

Morgan Stanley analysts noted that many lightweight alloys relied on magnesium.

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

“It’s also used in auto parts injection molding, as a desulfurization agent in steel, to make ductile iron, in chemicals and more.”

While analysts noted that there had been some production recovery in October, capacity utilization was capped at 40 percent of capacity and continued to pose a major challenge to the global market.

Automakers will be particularly hard hit as they continue to struggle with a shortage of computer chips.

“Automotives are an important end-market for magnesium, both through aluminum alloys and directly, and presents a new manufacturing challenge on top of existing disruption from chip shortages, particularly in Europe and Japan, where magnesium is primarily imported,” said Morgan Stanley analysis.

“Depressed auto production levels masked the magnitude of the impact of the existing shortages; it may not be possible for auto production to recover as forecasters like IHS expect.”