Unrealizable production of magnesium by China, adds to headwinds facing automakers

In recent days, European automakers who are already reeling from the global chip shortage have hastened to reassure shareholders that shortages in magnesium do not, for now pose a risk to production plans.

Car part suppliers and industry associations have warned that if magnesium production in China, which accounts for 85% of global supply, does not pick up pace, automakers could face significant shortage of the material.

Carmakers do not typically purchase large quantities of magnesium themselves and instead depend on automotive part manufacturers who are heavily reliant on the metal, which they use by itself or in combination with aluminium to reduce the weight of cars.

Decreasing the weight of vehicles is important in increasing the driving range of electric vehicles, which in turn is crucial for Europe’s energy transition plans.

In a statement BMW and Stellantis said, they do not see an imminent problem with supplies. Others in the sector said, their inventories and magnesium stocks are in transit and it will see them through to early 2022.

However, in an earnings calls, the head of purchasing at Volkswagen, said a shortage was expected.

“We cannot forecast right now if the shortage on magnesium, which will happen definitely according to planning, will be bigger than the semiconductor shortage,” said Volkswagen’s Murat Aksel.

According to industry sources, the availability of magnesium in China is around 50% of normal levels, following soaring coal prices and energy rationing which have prompted smelters to either cut down on their operations or shut down completely.

While China has allowed magnesium producers to resume output, but the measure is not enough to significantly ease shortages. As a result, although magnesium prices have retreated from their record high, they are however still more than 100% compared to prices in January 2021.

“We are very concerned this is going to impact us in a couple of weeks,” said Jonathan O’Riordan, head of Europe’s automobile manufacturer association ACEA.

Germany’s ZF, which uses magnesium for gearboxes and steering wheels, said, it was trying to source magnesium from other countries; but offsetting the loss of Chinese supply was limited given its significant market share.

“It’s the calm before the storm,” said Teresa Schad, a spokesperson for Germany’s metal association, WV Metalle.

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