An industry body has warned the current magnesium shortage leaves companies with little option but to reduce production.
European Aluminium told Supply Management the shortages are proving “extremely challenging” to Europe's packaging, automotive and construction supply chains.
Global shortages of magnesium – which is used to make steel and aluminium – have been triggered after the Chinese government ordered around 35 of its 50 magnesium smelters to close until the end of 2021 to prioritise energy for domestic use during an energy crisis.
A European Aluminium spokesperson told SM: “China produces 87% of all magnesium worldwide and supplies 95% of the European magnesium demand, so sourcing magnesium from other countries is extremely challenging.
“When you consider that magnesium cannot be replaced by another raw material, there is very little companies can do to adapt to the current magnesium crisis. Magnesium is an important alloying element and is difficult to reduce or replace by other alloying materials.
“If the magnesium supply remains disrupted, aluminium producers and their customers might have to curtail their production levels.”
The trade group previously signed an open letter to the European Commission, along with others including the European Steel Association and the European Automobile Manufacturers’ Association, declaring Europe will run out of magnesium stocks by the end of November if action isn’t taken.
The trade bodies warned there will be production shortages, business closures and job losses if the shortages aren’t resolved.
Magnesium prices have rocketed from approximately $2,000 per ton earlier this year to $14,000.
Germany’s association of metals producers WVM warned the shortages will have “massive” consequences across various sectors and supply chains.
It said: “With a supply bottleneck of this proportion, massive production losses are threatened in the entire aluminium value-addition chain in sectors such as the automobile, aircraft, electro-bicycle, construction, the packaging industry and engineering.”
The International Magnesium Association and the China Magnesium Association issued a joint statement expressing concern over how “prolonged disruption of primary magnesium metal production will have a lasting impact on the magnesium industry and the global economy”.
Steel shortages have hit the automotive industry, which has already been cripplied by shortages of semiconductors.
Car manufacturer Honda lowered its profit outlook amid steel and semiconductor shortages – the second time it has done so this year.
Honda's latest forecast for a operating profit of $5.8bn for the year to 31 March 2022 is 15% down on an August prediction.
Honda vice president Seiji Kuraishi warned: “We believed supply shortages would be limited, but we now see the supply shortage is more serious and will last longer.”
The European Commission said it had opened talks with the Chinese government “in order to address immediate shortages” and it is “assessing long-term solutions to tackle this strategic dependency”.
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