SHANGHAI, Sep 22 (SMM) - China, the largest producer of magnesium metal, closed a lot of smelters due to restrictions on emissions and energy shortages, which pushed up the price of magnesium to the highest level since 2008 and brought trouble for automakers.

Magnesium, which is widely used in the aerospace industry, is an essential metal for producing aluminium alloys in the auto industry which has been restrained by the shortage of chips. Magnesium is also used in zinc alloys, and tight supply is likely to have an impact on various industries such as notebook computers, mobile phones, and missile parts. According to International Magnesium Association, its prices have risen to a 13-year high and are expected to increase further in the next few months, then return to normal levels by the end of H1 of 2022.

President of IMA Rick McQueary indicated in a statement that this industry has never experienced such rapid market changes since 2008 Beijing Olympics as the reduction of production capacity and price hike is almost unprecedented.  The output of magnesium in regions outside China is not high. Most of the magnesium is produced in Shaanxi. According to sources, about 15 magnesium plants in Shaanxi have been required to suspend operations and 30 magnesium plants have been required to reduce 50% of production, which is valid from September to December. The output of magnesium in China increased 8.13% on the year to 434,000 mt in January-June. As the world's largest magnesium producing area, Shaanxi saw its output of 302,500 mt in H1, an increase of 16.92% year-on-year.

Market participants have predicted that magnesium supply will continue to tighten as China’s energy consumption control policies will continue until the end of this year, and magnesium prices are likely to reach new highs in the short term, which is likely to affect the production and demand of downstream industries. For instance, many downstream titanium and magnesium alloy producers have stopped production due to rising prices of magnesium raw materials and losses. A trader in Shanxi said: “The energy-saving and emission-reduction measures during the Beijing Winter Olympics will be stricter. We are not sure whether these restrictions will be loosened after the Games.”