European leaders, worried about the effect a global shortage of magnesium听will have听on听the European Union鈥檚听industrial recovery from the pandemic,听have open talks with China, which supplies the block听with听about 95% of听the听silvery-white metal听used to make听aluminum.听
Local听companies, including听Norway鈥檚听Norsk Hydro, have stopped producing magnesium because they听were unable to听compete with lower costs at Chinese producers.听
That would not have been a problem should Beijing not have recently ordered roughly 35 of its 50 magnesium smelters to close until the end of the year to conserve power supplies. This means current European inventories will be exhausted by the end of November, Germany鈥檚 association of metals producers WVM warned on Tuesday.
Magnesium is used for听a range of products, especially aluminum alloys,听which are used in several auto-parts from gearboxes and steering columns to seat frames and fuel tank covers.听
German Chancellor Angela Merkel and Czech Prime Minister Andrej听Babi拧,听leaders听of the continent鈥檚听top听automaking countries 鈥� raised the issue on Thursday during an EU leaders鈥� summit. The听European Commission听followed suit by opening a dialogue with China.听
鈥淲e are raising this issue with our Chinese counterparts in order to address immediate shortages and are assessing long-term solutions to tackle this strategic dependency,鈥澨齛 Commission spokesperson听acknowledged in an email to听Reuters.听
As the metal is difficult to store 鈥� it starts to oxidize after three months 鈥� global stocks could run critically low before the end of the year if Beijing doesn鈥檛 restart production in the next few weeks.听
鈥淭his issue, if not resolved, threatens thousands of businesses across Europe, their entire supply chains and the millions of jobs that rely on them,鈥澨齛 dozen industry groups, including metal producers, auto suppliers and the packaging sector said听.听
鈥淭he consequences would be catastrophic,鈥� they said.听
Record prices听
Undersupply has听pushed prices to record highs, currently trading at听$4,700 per听tonne. That鈥檚听more than double the听price听early this year听and the highest since 2008.听
In Europe, remaining stocks are going for $10,000-$14,000 a听tonne,听up from听$2,000 per听tonne听earlier this听year,听the industry groups said.听
The problem has already reached North America. Canada鈥檚听Matalco听Inc., which produces听aluminum billet,听told its clients last week that magnesium availability had 鈥渄ried up鈥�, and if the scarcity persisted it would have to curtail output听and听ration deliveries as soon as next year.听