China going green might leave the auto industry red with anger over alloy shortages

What did the automotive manufacturing industry say when China announced plans to go green, which would result in a shortage of magnesium production?

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Lame jokes aside, the fear is very much real and could very well be a stumbling block in automotive manufacturing globally.

China’s move to cut electricity supplied to high-energy factories in a bid to meet environmental targets means that magnesium production has plunged; with reports stating that stocks will run out by the end of November 2021.

As the world’s largest producer of the metal, automotive manufacturing is heavily dependent on them with magnesium employed in the manufacture of aluminium alloy for gearbox casings and engine blocks as well as wheels and suspension components.

Naturally, automotive manufacturers are almost entirely dependent on China as it supplies almost 90 percent of the world’s magnesium. The European Automobile Manufacturers’ Association (ACEA) issued a warning regarding the impending shortage, stressing that “production shortages will lead to business closures and subsequent loss of jobs.”

As for a magnesium substitute, the association says there is no alternative to magnesium in aluminum billet production.

“China’s domination of the market means alternative sources of magnesium on the scale required should the Chinese shutdown persist simply do not exist,” the ACEA said.

On the back of the chip shortage that has delayed production for millions of new vehicles, the magnesium deficiency will severely compound that problem.

According to Nikkei Asia, China’s advantage in magnesium production lies with its cheaper coal and electricity costs; hardly a surprise to anyone.

Magnesium is sensitive to coal and ferro-silicon prices and supply. Pricing has now settled around $A6.40 (~RM19.50) a kilogram following a recent jump to $A12.50 (~RM38.00) a kilogram as China clamped down on coal mining, in turn forcing coal-fuelled generators to operate on reduced outputs.

Previously, pricing surged to around $A9 (~RM27.40) a kilogram during the 2008 Olympics as China restricted coal power plants to reduce air pollution.

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Although the automotive manufacturing industry is realising too late that you shouldn’t put all your eggs in one basket, the industry is projecting “increasing demand to buy from other countries.”

Other magnesium producing countries include Turkey, Israel, the US, and Brazil; although none of them can deliver the massive quantities that China does.