Supply crunch

Workers refine magnesium

Two of the symptoms for sufferers of magnesium deficiency are nausea and anxiety. Companies in Europe are experiencing something similar after a sudden collapse in Chinese exports of the metal.

China accounted for 90% of world magnesium supply in 2020, with production heavily concentrated in Shaanxi province. In September, the provincial authorities implemented restrictions on output in response to central government directives to reduce pollution. A number of smelters were ordered to cut production and others were shut completely. The move was also driven by two other shorter-term factors. One was a need to clear the skies for the National Games, which were held in the province in the same month. The other was to conserve energy supply, amid a context of nationwide electricity shortages.

However, buyers of magnesium in Europe only had stockpiles that lasted until the end of November (the metal starts to oxidise after three months, so longer term storage is a challenge). As a result, the price per tonne shot up from the $2,500-level seen for most of 2020 to between $10,000 and $14,000 over September and October.

The price spike is more bad news for the global automotive industry, which is grappling with semiconductor chip shortages. Magnesium is a key material in the aluminium alloys used in many car parts.

Chinese netizens responded to news of the price rises with wry amusement. Some said the Europeans were to blame for no longer mining magnesium themselves (local companies like Norway’s Norsk Hydro have stopped producing magnesium because they were unable to compete with lower costs at Chinese producers). Others saw double standards in European complaints about restricted supply, when Chinese firms have been denied access to crucial items from Europe, like advanced semiconductor tools.

As one netizen put it: “European countries always work with the US to suppress and humiliate China… Don’t pity them. Don’t be soft- hearted. Give them a taste of their own medicine.”

China now accounts for at least 85% of global magnesium supply. The only major exception to their monopoly is US Magnesium, which has been protected since 2005 by Washington’s anti-dumping tariffs. Shifts in the magnesium industry have mirrored changes in the global economy, since British chemist Sir Humphry Davy first discovered the mineral at the beginning of the 19th century. The UK was the first to develop magnesium for commercial use, following the invention of photography. Germany’s industrialisation and subsequent militarisation then gave it a commanding lead in the sector in the run-up to Second World War. By that point, the Germans were producing four times as much as the British, who were making twice as much as the Americans.

That all changed after the war, with a long period of American ascendancy. By the 1990s, the US accounted for almost half of global production, with Europe capturing much of the remainder.

The next major shift emerged when Chinese producers started using the Pidgeon process to create magnesium from calcined dolomite. This process, named after its Canadian inventor, is cheaper but energy- intensive because of huge heat loss during production.

That was less of a concern to the Chinese when industrial development was a higher priority than environmental protection. By that time other global producers had switched to electrolysis, which is more environmentally friendly but also more expensive. But changes in China’s priorities could prompt another major shift in the sector, with a EU spokesperson telling Reuters that the commission was “assessing long-term solutions to tackle this strategic dependency”.

The Global Times took a different line, describing the shortages as another example of how China’s efforts to reduce energy consumption and control carbon emissions are intertwined with global supply chains. It also called for more international coordination in the supply chain “rather than pressing one side to fix the problem”.

In the meantime, there are signs that exports will pick up again, with some Shaanxi smelters returning to fuller production in late October.

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