China has built a monopoly on the global supply of magnesium in the last two decades and they have managed to overcome their European rivals by engaging in large-scale dumping.
POREG (Policy Research Group) reported that China that manufactures more than 95 per cent of Europe’s magnesium requirements, has cut back on production leading to considerable disquiet in the European Union (EU), as magnesium is vital to sectors such as cars, aircraft, and electronics.
At the recent EU leaders’ summit (Oct 21-22, 2021) both Angela Merkel, the outgoing German Chancellor and Andrej Babis, Czech Prime Minister raised the issue, on the heels of the crisis of semi-conductors in Europe.
Both Germany and Italy are Europe’s leading car manufacturers and their concern about the knock-on effect on car production is but natural. While Chancellor Merkel pointed to the impact on the cost of production of cars, the Czech PM was even more blunt when he said the sector was facing a ‘disaster’, reported POREG.
China has cut back production because of the nationwide energy shortages. Other producing nations like Russia and Israel find it difficult to fill the shortfall, as China is by far the world’s largest producer.
The dependence on China is an embarrassment to the EU at this juncture as it attempts to balance relations with China while trying to break free of its supply chains.
Global Times reported (24 October 2021) that while many businesses had resumed production and trading, hurdles and restrictions continued to limit output and could result in a 10 per cent drop in exports of magnesium.
According to a joint statement issued by a dozen EU industry groups, magnesium stocks now risk running out by the end of this month (Nov 2021). With Chinese factories partially closed due to the nationwide energy crisis and exports of magnesium falling rapidly, Europe faces a real challenge. The joint statement warned about “far-reaching ramifications on entire European Union value chains,” and added that the construction and packaging industries are also feeling the heat, reported POREG.
If not resolved immediately thousands of businesses across Europe could be threatened to impact their entire supply chains and jobs that rely on them. The industry bodies have therefore called for urgent action by the EU. There are few guarantees that China will immediately respond or provide long-term assurances, reported POREG.
Also Read:
Global aluminium prices have more than doubled since April 2020 to over $3,000/tonne (Rs 225/kg) in October whereas domestic aluminium prices have gone up by more than 75% since April 2020 to more than Rs 245/ kg in the same period.