Companies have been warned of “likely production disruptions” within weeks due to the magnesium shortage.
China, which provides around 95% of European supplies and 87% of global production, has restarted magnesium smelters but low stocks and long lead times spell potential trouble ahead.
The European Commission (EC) is in talks with China about the situation and described the relationship as a “strategic dependency”.
An EC spokesperson told SM: “China is restarting the production of magnesium, but falling stocks in the EU, uncertain trading environment and long lead times for shipping of magnesium from China, point at likely production disruptions in the EU by the end of November 2021.
“We are raising this issue with our Chinese counterparts in order to address immediate shortages and are assessing long-term solutions to tackle this strategic dependency.
“The Commission is aware of the current shortage of magnesium, which is affecting global supply chains. We are monitoring the situation closely together with the EU industry.”
The Chinese government previously forced 35 of its 50 magnesium smelters to close until the end of 2021 in response to energy shortages.
China has allowed some magnesium producers to resume and output stands at around 50%, according to Reuters. Magnesium is critical to the automotive, construction and packaging industries.
However, Eurofer, the European steel association, said it would take three months for supplies to arrive in Europe.
A spokesperson told SM: “The softening of the magnesium market is due to the partial restart of Chinese magnesium production, which however will take at least three months before being available on the EU market.
“Overall, these latest developments don’t necessarily imply the end of the supply shortage, and of its potential consequences on production levels across sectors.”
The Chinese Magnesium Association said prices had dropped from a peak of almost 70,000 yuan ($10,972) per tonne at the end of September, to around 30,000 yuan ($4,702) per tonne. However, these prices are still almost double the levels seen in January.
Rick McQueary, president of International Magnesium Association, told SM: “From what we hear, there are still industry concerns about the supply of magnesium from China, but the situation is improving.
“Prices have stabilised and capacity continues to improve but it is uncertain if additional shutdowns will be required through the balance of this year. This is leaving the industry cautiously optimistic.”
Volkswagen told SM that it does not currently have any supply issues, but the company is “monitoring the situation on the world market very closely”.
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