Auto & Transportation

Reports According to the French "Echos" website, the sufferings of automakers have not yet come to an end. After the "core shortage", the "magnesium deficiency" is threatening various factories. This metal can make automotive aluminum harder and lighter, and it can also make welding easier. The magnesium content in automotive aluminum is between 3% and 5%.

Magnesium can be found on the gearbox, around the airbag, steering wheel, seat or fuel tank of a car. The analysts of Kepler Shengfu Securities said: "Magnesium is as critical to maintaining the normal operation of the auto industry as it is to maintaining the normal functioning of the human body."

According to reports, 90% of the world's magnesium is produced in China, especially in Yulin City, Shaanxi Province. The magnesium supply in this region alone accounts for 44% of the world's total supply. However, due to energy shortages and power outages, the local government requires some producers to stop production before the end of the year, while the rest can only operate half of their production capacity to reduce the pressure on the grid.

The production of magnesium consumes an extremely large amount of electricity, and one ton of magnesium requires as much as 35-40 MWh, while one ton of aluminum, which is already very energy-intensive, consumes 13.5 MWh. As the current supply of magnesium is small and the inventory is small, its price has soared. According to the German Mineral Resources Agency, the price of magnesium in Europe has risen 160% since August, close to US$10,000 per ton.

According to Bank of America estimates, the automotive industry accounts for 30% to 35% of the global magnesium consumption market, and each car consumes an average of 15 kilograms of magnesium. Because of its light weight, magnesium is destined to be used more in automobile manufacturing, especially in the production of electric vehicles with heavy batteries. Bank of America analysts warned: "The'magnesium deficiency' may lead to a lack of aluminum, which may have an impact on automobile manufacturing."

Many large European metal production companies have sounded the alarm. They stated in a joint announcement that "magnesium deficiency" would threaten the production and millions of jobs in thousands of companies in Europe. They called on the European Commission and governments to strengthen ties with China and find a short-term way to ensure the safety of magnesium supply.

WV Metalle, the German non-ferrous metals association, has previously called on the German government to urgently initiate consultations with China to avoid a crisis similar to "core shortage". The association warned: “Mg stocks in Germany and Europe may be exhausted before the end of November.”

In the United States, related companies have already mentioned the problem of insufficient aluminum production. Matalco, the largest aluminum billet producer in the United States, told its customers in advance that it may reduce production capacity and adjust the supply of aluminum billets from next year. Alcoa, the major unforged aluminum producer in the United States, also warned of the threat of "magnesium deficiency". It wrote in an open letter on October 13: "For several weeks, magnesium has been almost exhausted, and we can’t Buy the magnesium you need in 2022."

According to calculations by Kepler Shengfu Securities, for every ton of magnesium missing, BMW will produce 85 fewer cars, while Volkswagen will produce 106 fewer cars. Therefore, the impact of the loss of automobile production caused by "magnesium deficiency" may actually exceed the cost increase caused by the soaring magnesium price.