Prices for EV metal magnesium at 3-month highs, users scramble for non-Chinese supply
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Magnesium prices in China have surged to ~$US7,846/t for the first time in three months, and are expected to stay high amid tightening environment controls, according to S&P Global Platts.
Magnesium is a light and strong ‘green metal’ which has the best high strength-to-weight ratio of all common structural metals.
It is 75% lighter than steel and 33% lighter than aluminium and titanium, making it perfect for electric vehicles.
Like many raw materials, most of the world’s 1 million tonnes per annum of magnesium supply comes from China.
Markets like the EU source more than 90% of magnesium requirements from the country, which has slashed production due to an ongoing power crisis.
While prices are well down on an all-time high level of $US11,200/t reached in September, they are still elevated.
In 2020, the average magnesium price was just $US2,127/t, data by China Nonferrous Metals Industry Association showed.
Industry players expect market sentiment to remain bullish in the near term, according to S&P Global Platts.
Tightening environmental controls in China, which affects energy intensive sectors like magnesium smelting.
“Environmental protection staff has remained in Shaanxi’s Yulin city from Dec. 4 and will stay through Jan. 4, 2022,” S&P Global Platts says.
The Shaanxi province alone produces ~65% of the world’s magnesium.
“As future environment control policies are yet to be announced, such measures impact on smelting operations remains uncertain, sources said,” S&P says.
“Out of the 349 single furnaces at 23 Chinese magnesium smelters being inspected, some of their semi-coke output capacity of below 75,000 mt/year may not meet sector rules,” a market observer said in a webinar recently.
“He said furnaces may see potential shutdown later, which could impact magnesium ingot supply in the near run.”
In the last month, Aussie near term producer Latrobe Magnesium (ASX:LMG) says it has received enquiries for the supply of 20,000 plus tpa of magnesium from users globally that want to diversify their supply away from China.
“In Europe it was reported that stocks of magnesium will be exhausted in December, and this will have repercussions in relation to car production,” it says.
“Most countries have 3 to 6 months of inventory.”
And while current pricing action is mostly sparked by supply constraints, the demand story is also strong.
In last four years, aluminium sheet containing up to 6% Mg was used in cars for the first time, as producers look to produce lighter, more CO2 efficient vehicles, near term producer Latrobe says.
“Combined with the surge in EVs, magnesium demand is set to drastically increase as car producers look to ‘light-weight’ heavy EVs,” it says.
“China, the world’s biggest car producer has a 13-year plan to increase Mg in cars from 8.6kg in 2017 to 45kg in 2030.
“This will generate 1 million tonnes of new demand per annum [alone].”