“Current German magnesium reserves are expected to run out in a few weeks, by the end of November 2021 at the latest,” said a statement from the German non-ferrous metal traders’ association WV Metalle, quoted by the Financial Times. The problem can affect the whole of Europe.
The raw material is crucial in the production of aluminum alloys and steel. Aluminum, in turn, is essential for the production of engines, tanks, bodies and thus the production of cars. Aircraft and shipbuilders, the construction and packaging industries are also expressing their concerns.
“There is no substitute for magnesium in the production of aluminum sheets,” Barclays analyst Amos Fletcher told the Financial Times. According to him, if the production of this metal stops, it will be necessary to stop the automotive industry as well.
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China has an almost monopoly on magnesium
Chinese magnesium deficiency can threaten not only industry in Europe, but around the world. According to the Financial Times, China has an almost monopoly on magnesium production, as it is responsible for 85 percent of the world’s production of this raw material.
Most of the production takes place in the Chinese city of Yulin in Shenxi Province. The American server states that about a month ago the Chinese government decided to close thirty-five smelters and ordered the remaining twenty-five to reduce production by fifty percent. This will also reduce deliveries abroad.
Like Europe, China is facing an energy crisis. Electricity prices are rising sharply, which increases the cost of production. Thirty-five to forty megawatt hours of electricity are needed to produce one ton of magnesium, according to the Finacial Times. The Chinese government therefore began to restrict industry.
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Magnesium is hardly produced in Europe, with the exception of a company in the Netherlands. It can also be imported from Israel or Russia. However, the vast majority, ninety-five percent, of magnesium in Europe comes from China, which has flooded the market with cheap goods in the past. It is alleged that these were dumped prices which European magnesium producers could not compete with and began to close.
Magnesium deficiency is an example of dependence on China
Resolving the situation is not easy. European politicians addressed it last week at the energy summit in Brussels. Behind closed doors, the outgoing German Chancellor Angela Merkel (CDU-CSU) reportedly spoke about her. The Czech Prime Minister Andrej Babiš (YES) also mentioned the problem at a press conference.
“With our pressure of the Green Deal, we have persuaded China to stop producing magnesium, but we need magnesium for cars,” Babiš said a week ago.
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According to Reuters, politicians will not put too much pressure on China to meet climate targets at the COP26 climate conference in Glasgow in November. The resumption of Chinese magnesium production is essential for the functioning of global industry and trade, which is essential for Europe.
According to the European Aluminum Industry Association, the current magnesium deficiency is an example of the risk of the EU’s domestic economy being dependent on imports from China, the Financial Times quoted the association as saying.
This is the second blow for European carmakers. Due to the lack of Chinese chips, some factories are already standing today.
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