European industry warns of magnesium supply emergency

Several European trade associations have warned of Europe-wide production shutdowns in key sectors because of a "critical shortage" of magnesium supply from China.

In an open letter to the EU Commission today, the European Automotive Manufacturers Association (ACEA), Eurometaux, IndustriAll Europe and several others warned against the "catastrophic impact" of production shortages, business closures and associated job losses as Europe is expected to run out of magnesium stocks by the end of November.

"Our industries jointly call on the EU Commission and national governments to urgently work towards immediate actions with their Chinese counterparties to mitigate the short-term, critical shortage issue as well as the longer-term supply effects on European industries," said the letter.

Some magnesium importers disagree with the associations' assessment, expecting supplies to last until January 2022 for most of their large industrial customers. Magnesium is difficult to store, with a three-month shelf life before starting to degrade and oxidise, which means the metal is hard to stockpile.

For years, European industries have raised concerns over the region's reliance on China for most of its supply of key raw materials, with several attempts to set up magnesium supply chains failing because of cost of production and pushback from buyers. It remains unclear what options the European Commission has other than to engage with China to improve the supply situation.

China produces around 87pc of the 1.2mn t global magnesium output each year, while Europe is almost totally dependent on China for magnesium supply at 95pc. China cut magnesium output because of the energy crisis currently gripping the country. In the main production hub of Yulin City, 35 producers were shut down and another 15 were forced to cut production rates to hit government energy reduction targets.

The letter says import offers for magnesium range from $10,000-14,000/t for magnesium in October, up from their estimate of $2,000/t earlier in the year.

"They've battered any western producer for being too expensive for the past 15 years, being entirely reliant on one country. Now that country has power issues and they cry foul," said one European magnesium trader.

Argus assessed European 99.9pc min magnesium prices at $8,300-9,000/t duty unpaid Rotterdam yesterday, down from $8,600-9,950/t on 20 October after some production came back on line in China's Fugu county in Yulin City.

Further disruption is expected, as China strives to meet energy targets and upcoming events such as the Winter Olympics put extra pressure on local governments to reduce pollution and energy usage.

By Thomas Kavanagh