Supply chain woes have dominated headlines throughout the 2021 calendar year, with the ongoing global microchip shortage heavily impacting auto industry production, including for General Motors. Now, there are rumblings that further issues may arise with a magnesium shortage in China.
In a recent report, Financial Times states that the current Chinese magnesium shortage could impact automakers with a wide-sweeping shortage of aluminum. Magnesium is required in aluminum production as an alloying agent, which means if there is a substantial magnesium shortage, aluminum production could stop as a result.
Aluminum is used for a wide variety of automotive components, offering high strength and low weight. Just a few examples of aluminum car components would include wheels, vehicle bodies and frames, engine components, and transmission components.
Now, however, China is in the midst of an energy crises, with rising energy costs that result in increased costs for magnesium production. China provides the majority of industrial magnesium, while a magnesium shortage could precede an aluminum shortage that impacts the auto industry.
According to the Financial Times report, roughly 85 percent of the world’s magnesium production takes place in China. However, some magnesium production also takes place in North America, with one large domestic producer, US Magnesium, offering a small degree of protection from a large Chinese magnesium shortage.
“Aluminium producers North America are also working their scrap supply chains very aggressively to make up for whatever raw magnesium they are not able to source,” said research manager at commodities consultancy CRU, Stephen Williamson, per the Financial Times report.
For the moment, no automakers have issued warnings over the magnesium shortage or how it could impact aluminum production, and as a consequence, automotive production. Nevertheless, European companies are already feeling pressure as Chinese magnesium stockpiles run dry.
“The current magnesium supply shortage is a clear example of the risk the EU is taking by making its domestic economy dependent on Chinese imports,” said European Aluminum in a recent statement.