Magnesium is an important raw material for aluminum, which cannot be produced without it. No magnesium has been produced in Europe since 2001. The aluminum industry is therefore imperatively dependent on a well-functioning supply chain.
But the main supplier, China, has imposed an export ban on the important raw material. With magnesium stocks already exhausted in November, there is a threat of a price explosion for aluminum.
Delivery stop in China
Magnesium metal is found in the earth’s crust worldwide. But the extraction of magnesium is costly, environmentally harmful and very energy-intensive. In Europe, for example, all magnesium production was discontinued as early as 2001.
In the meantime, the largest quantity of the so important raw material comes from China. China is the world’s largest magnesium supplier and controls the global market with about 87 percent of global magnesium production.
Since mid-September, the Chinese government has almost completely halted magnesium shipments abroad. Officially, the reason given for the delivery stop was that energy consumption in China needed to be controlled more closely due to a shortage of electricity.
Stocks already exhausted by the end of November
Until now, the magnesium mainly required for the production of aluminum came exclusively from China. A supply freeze therefore causes great difficulties for the German industry.
Magnesium can also not be stored for very long. The rapid oxidation of the metal ensures that magnesium can be stored for a maximum of only 3 months. Inventories are therefore correspondingly limited.
The metal industry has now sent an incendiary letter to the German Foreign Office, which includes a statement that magnesium supplies have been exhausted. So without new supplies, aluminum can no longer be produced.
If the magnesium smelters in China do not produce as usual from January, production losses are inevitably to be expected in Germany as well.
The automotive industry is particularly affected. However, numerous other industries will also no longer be able to manufacture their products as usual. The entire aluminum value chain would be affected. In addition to cars, airplanes, electric bicycles and other machines could no longer be built. Similarly, iron and steel production would no longer be possible, so other industries such as construction would also be affected.
Price explosion expected
Even before the Chinese supply freeze, aluminum prices were soaring due to general and Corona-related supply chain problems. In its fire letter to the German Foreign Office, however, the metal industry assumes that the prices for aluminum, which is still available on the market, will also shoot up extremely.
Numerous industrial companies also expect the price explosion to continue well into the coming year.
At present, no one can say whether China will actually resume magnesium production in January at the latest. However, the EU has been aware of the problem for some time. Magnesium, for example, has been on the list of critical raw materials since 2017 – but so far no countermeasures have been taken.
