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European carmakers warn about magnesium supply shortage

22 October 2021

The European Automobile Manufacturers’ Association (ACEA)—together with a number of other industry associations, including European Aluminium, Eurofer, Eurometaux, industriAll Europe, ECCA, ESTAL, IMA, EUWA, EuroAlliages, CLEPA and Metals Packaging Europe—have today issued an “urgent call for action” against the imminent risk of Europe-wide production shutdowns as a consequence of a critical shortage in the supply of magnesium from China.

Magnesium is a key alloying material used in the production of aluminum, steel, and other metals. Without urgent action by the European Union, this issue, if not resolved, threatens thousands of businesses across Europe, their entire supply chains and the millions of jobs that rely on them, ACEA said.

Due to the ongoing shortages of coal and electric power, the Chinese government has been taking steps to curb domestic power consumption. As a result, the production of magnesium in China has either been halted or reduced drastically since September 2021, resulting in an “international supply crisis of unprecedented magnitude”.

The European Union depends on China for 95% of its magnesium supply. The European aluminum, iron and steel producing and using industries together with their raw materials suppliers are particularly impacted, with far-reaching ramifications on entire European Union value chains, including key end-use sectors such as automotive, construction and packaging.

The current Chinese supply shortfall has already resulted in record prices and worldwide distortions in the supply chain. Today’s remaining magnesium imports are trading at “extortionate prices” of about $10,000 to $14,000/tonne, up from approximately $2,000/tonne earlier this year, making it almost impossible for European companies to produce or source magnesium-containing materials at a viable level.

Europe is expected to run out of magnesium stocks by the end of November, according to ACEA, with production shortages, business closures and associated job losses to follow. To that effect, ACEA and other industries have called on the European Commission and national governments to urgently work towards immediate actions with their Chinese counterparties to mitigate the shortages.

The shortage of magnesium is not limited to Europe, as China supplies some 85% of global magnesium production. “In the last several weeks, magnesium availability has dried up, and we have not been able to purchase our required magnesium units for all of 2022,” Matalco President Tom Horter said in a letter to its customers and business partners, seen by S&P Global Platts. “The purpose of this note is to provide this advanced warning that, if the scarcity continues, and especially if it becomes worse, Matalco may need to curtail production in 2022, resulting in allocations to our customers.”

Canada-based Matalco produces about 1.15 billion lbs of aluminum billet and log across five locations in North America. In March, the company said it was planning to increase its nameplate capacity to about 1.5 billion lbs in 2022, with the start of production at its sixth location in Kentucky.

Source: ACEA | S&P Global Platts