;Resize=(1200,627)&hash=bc226d350bd614291b255069cfbf1a42c4996a490a343df62338f7657dd2c038 "Blackout risk: China’s lack of electricity is now paralyzing the entire global economy")
Silicon and magnesium are two of the most important raw materials in today’s industry. The former is essential for the construction of semiconductors and thus smartphones, laptops and all other electronics. The latter is used in the form of alloys wherever weight but not stability has to be saved – for example in the construction of cars and airplanes.
Both are actually not rare raw materials. After oxygen, silicon is the second most abundant element in the earth’s shell, magnesium is in ninth place. Nevertheless, one country, China, has become a monopoly. The deposits here are plentiful, the environmental concerns associated with the energy-intensive processing of the raw materials – they rarely occur in their pure form in the earth – are low and extraction is cheap. Other parts of the world have therefore outsourced production to the Far East.
But that is now becoming a problem. Several provinces in China have passed decrees according to which massive electricity savings must be made by the end of the year. To achieve this, factories are either shut down or closed entirely. And of course the Chinese start where a lot of energy is consumed – with raw materials such as silicon and magnesium.
China fell out with Australia
There are two reasons why China suddenly has to save electricity. The government is at least partially to blame for both, and both have to do with coal. The fossil fuel is still the most important raw material for power generation in China. In 2020, 49 percent of electricity was generated from coal. China produces most of the coal itself in its own country, but that is not enough. That is why it has supply contracts with other nations, above all Australia.
But China and Australia fell out in 2020. It is a thorn in the side of the government in Beijing that the colleagues from Canberra first excluded the Chinese company Huawei from expanding the 5G network in Australia and then clearly criticized the giant state during the Corona crisis.
Foreign Minister Marise Payne called for an independent investigation into the origin of the Sars-Cov2 virus. China felt snubbed and let the Australians feel it. It started with a ban on the import of Australian wine and then grew to the fact that Australian coal freighters were no longer allowed to dock in Chinese ports. Beijing remains tough even now that they are literally running out of money.
Ambitious climate plans threaten the supply
But the lack of supplies is only one of the two problems with China’s power generation. The second is that the country wants to be one of the pioneers in the energy transition. To this end, Beijing has forged an ambitious and concrete plan. The country should be climate neutral by 2060. To do this, it is essential to get coal out of the energy mix quickly. But it doesn’t go that fast. The share of coal in the electricity mix decreased from 65 to 49 percent between 2016 and 2020, but last year alone China increased its coal production by more than what Germany is reducing overall in one year. 56 gigawatts of power from coal-fired electricity were newly connected to the grid. The whole of Germany only has 221 gigawatts. However: Renewable energies are growing faster. 2020 was a record year for China with 73 gigawatts more wind and 48 gigawatts more solar power.
It will take some time before renewable energies replace coal. Beijing has already set tough emissions targets for its provinces. These can hardly be met at the moment, especially in the industrial regions, which is why the provinces of Yunnan (silicon) and Shaanxi (magnesium) recently turned off the taps – initially until the end of the year.
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For Germany’s industry, this means a lack of raw materials and the products made from them. According to the Metals Association, the local magnesium stocks should only last until November. Silicon is also scarce. The production problems in China come on top of general problems. Semiconductors and computer chips were already rare before China restricted its funding.
Other countries also produce the two raw materials, but that is not enough and is driving prices up insanely. Silicon is more than three times more expensive on the world market than it was a year ago. Magnesium has almost quintupled in price. This situation is unlikely to ease up until next spring. After all, the Chinese also need more energy for heating in winter. For the time being, the restrictions only apply until the end of December so that the provinces can achieve their annual targets. It is not unlikely that a similar situation threatens in the coming year.
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