Magnesium production rises but supply remains 'critical'

26 November 2021

Fears that magnesium supplies would run out by the end of November have not materialised but industry has warned the situation remains “critical”.

A coalition of industry bodies wrote to the European Commission to warn magnesium stocks – used to produce steel and aluminium – would run out at the end of this month if action wasn’t taken. 

But while production in China has now been raised to 70% – after it was halted due to an energy crisis – industry bodies warn this is not enough to ease supply strains.

A spokesperson for European Aluminium, which represents Europe’s aluminium industry, told Supply Management: “We are still very concerned about the situation. For the aluminium industry, where magnesium is a key – and often non-substitutional alloying material – the supply shortage crisis remains critical.” 

European Aluminium said while production had improved, lags in magnesium arriving in Europe from China – it can take up to three months – meant the issue was ongoing. 

The spokesperson said: “Magnesium production is still only at a 70% production rate compared to a year ago, lagging behind today's magnesium demand by far. In conjunction with the months-long timespan to transport Chinese magnesium to Europe, we cannot see any easing of the situation. 

“While the magnesium prices slightly fell since the beginning of the production curtailment in China, the price level is still about three to four times higher than at the beginning of the year, not to mention the historic price development.  

“The price volatility and, thus, price uncertainty is an additional risk factor for Europe's post-pandemic economy.”

China produces around 87% of global magnesium demand and provides around 95% of European supplies. 

The European Association of Automotive Suppliers (CLEPA) said it had sufficient magnesium to last until the end of the year but still had concerns over supplies in the first quarter of 2022. 

A spokesperson told SM: “Our position at the moment is one of cautious optimism.

“At the moment, most OEMs [original equipment manufacturers] and suppliers said that they were mainly concerned about quarter one of 2022.” 

CLEPA said while prices had stabilised in Europe they remained elevated.

The spokesperson said: “In short, there are positive signs, but we cannot be sure that this will not hit us in the first quarter of 2022.”

China’s magnesium exports have risen by 44% since September to reach their highest export levels in 19 months in October, according to Reuters. 

Exports reached 24,329 tonnes in October, up from 16,921 tonnes in September, meaning exports reached their highest monthly record since March 2020's figure of 38,319 tonnes, when China was clearing a backlog of shipments following the outbreak of Covid-19.

Data from Asia Metal shows magnesium prices have dropped by 43% from their record high of 63,000 yuan (around $9,860) per tonne in late September, with prices falling to 36,000 yuan (around $5,636) in October.

This is still up from pre-pandemic prices of around $2,000 per tonne.

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