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.

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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.

“It is expected that the current magnesium inventories in Germany, and respectively in the whole of Europe, will be exhausted by the end of November 2021,” the letter said, according to Reuters.

The European Automobile Manufacturers Association (EAMA) also submitted an open letter to the EU Commission last week flagging the “catastrophic impact” of production shortages, business closures and associated job losses if Europe runs out of magnesium stocks by the end of November, according to a note by Argus Media, an independent provider of energy and commodity price benchmarks.

“Our industries jointly call on the EU Commission and national governments to urgently work towards immediate actions with their Chinese counterparties to mitigate the short-term critical shortage issue, as well as the longer-term supply effects on European industries,” the EAMA’s letter said.

Magnesium production at Yulin’s roughly 50 smelters in Fugu county – which account for about 60 per cent of China’s total output – was halved from mid-September, and 15 of those smelters are likely to see a complete halt in production until March, according to industry figures and media reports.

The CNMA said magnesium prices quoted by producers in the Shanxi region from late September to early October were 52,600-52,700 yuan a tonne, while those in Ningxia were 52,400-52,500 yuan a tonne, and in Shaanxi the prices were 52,400 to 52,500 yuan a tonne.

“Now, with the magnesium supply also tight, carmakers are facing higher production costs and further potential output curbs.”

Mok said the impact of the power cuts is telling. In September, new European car registrations fell 23 per cent, China’s automotive output dropped 17.9 per cent, and Toyota Motor cut its total output by 40 per cent.

Magnesium is used to strengthen aluminium alloys – a key raw material in auto production. An estimated 15kg of magnesium is used in every car produced, Mok said.

Magnesium production is especially vulnerable to the power crisis because, in addition to being so power-intensive, it also emits five times the carbon pollutants compared with steel production, according to research by Shanghai Jiao Tong University.

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And for those automotive producers outside China that are able to secure supplies, they have been facing higher export prices.

Export prices in September were twice as much as the average export price between January and August, according to the CNMA.

The free-on-board price – referring to the risk-factored price borne by the buyer – rose to US$6,573.57 a tonne in September, from US$3,258.06 a tonne at the start of the year.

At the end of September, some manufacturers and traders were quoting prices of between US$8,240 and US$8,250 a tonne.

North America is also suffering from a magnesium shortage but, unlike Europe, has a large domestic producer, US Magnesium, which has offered a degree of protection, said Stephen Williamson, research manager at commodities analyst CRU Group.

However, Lin Ruhai, president of the CNMA’s magnesium branch, told delegates at the association’s 24th annual conference in Yulin last week that the crisis was not expected to last, as consumers would seek out magnesium substitutes, thereby cooling demand and price of the metal next year, according to a note by Argus Media.