The world鈥檚 top automakers face disruption from tight global supplies of magnesium,聽as China鈥檚 power crisis聽threatens聽availability聽of聽the聽key component used to make聽aluminum, Germany鈥檚聽association of metals producers WVM said on Tuesday.听
European magnesium stocks have been particularly affected聽by the lack of supplies from China, which has a near monopoly on the magnesium market,聽the association said in a letter to the German government.听The worst part of this shortage is about to come, it noted.听
鈥淚t is聽expected聽that the current magnesium inventories in Germany and respectively in the whole of Europe will be exhausted by the end of November 2021,鈥� the letter said.听
Magnesium is used for聽a range of products, especially aluminum alloys,聽which are used in several auto-parts from gearboxes and steering columns to seat frames and fuel tank covers.听
China, which is Europe鈥檚 main magnesium supplier, has ordered聽roughly 35 of its 50 magnesium smelters to close until the end of the year to conserve power supplies.
What makes the shortage a pressing issue is that聽there are no substitutes for magnesium in aluminum sheet and billet production.听
鈥淭hirty-five per cent of downstream demand for magnesium is auto sheet 鈥� so if magnesium supply stops, the entire auto industry will potentially be forced to stop,鈥澛燘arclays聽analyst Amos Fletcher said in a report聽.听
According to Reuters鈥櫬�columnist Andy Home, the聽growing shortage of both silicon and magnesium suggests that聽a downstream hit may shortly be following the upstream smelter hit.听
The WVM called on Germany鈥檚 government to start talks with China about increasing magnesium supplies to Europe, and to press the European Union to return magnesium production to the聽Old聽Continent.听
鈥淲ith a supply bottleneck of this proportion, massive production losses are threatened in the entire聽aluminium聽value-addition chain in sectors such as the automobile, aircraft, electro-bicycle, construction, the packaging industry and engineering,鈥� the association said.听
The problem has already reached North America. Canada鈥檚聽Matalco聽Inc., which produces聽aluminum billet,聽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聽and聽ration deliveries as soon as next year.听
(With files from Reuters)聽