China’s power crisis sends magnesium prices skyward, choking supply chain and leaving Europe desperate

Global automotive industry depends on magnesium, but China has nearly a complete monopoly on the industry, producing 87 per cent of the world’s supply

Magnesium production is power-intensive and emits five times more carbon pollutants than steel production, meaning some smelting plants may be shut down for several months

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China has nearly a complete monopoly on magnesium, which is used to strengthen aluminium alloys – a key raw material in auto production. Photo: Xinhua

Published: 1:00pm, 28 Oct 2021Updated: 3:22pm, 2 Nov 2021

After years of stable prices, magnesium costs have skyrocketed while a shortage of the metal is choking downstream users in its supply chain, especially the global automotive industry.

And it appears that China’s power crisis and subsequent crackdown on energy-intensive industries is largely to blame. China has almost a complete monopoly on the metal’s global production, and the smelting process is very power-intensive.

A monthly review of the metal, by the China Nonferrous Metals Industry Association (CNMA), revealed a sudden spike in the price of magnesium between August and September, when it doubled to a monthly average of nearly 42,000 yuan (US$6,600) a tonne – a 230 per cent year-on-year increase – and nudged as high as 70,000 yuan (US$11,000) a tonne during September.

Magnesium’s price had been hovering between 14,000 and 20,000 yuan a tonne over the past decade.

The shortage and soaring prices are of particular concern to the metal’s primary user – carmakers.

Last week, the German non-ferrous metal industrial association WVM wrote to the German government, warning about the impact of the shortage on all of Europe, as a result of China’s power cuts. It also noted that China accounts for 87 per cent of the global production of magnesium.