As the automotive sector struggles to sustain production in the face of semiconductor shortages, concerns over the stability of magnesium supplies are surfacing.Magnesium is of central importance for the production of aluminium, which plays an essential role in automobile manufacture.Most of the magnesium used in the manufacture of auto parts comes from mainland China.The price of the commodity has tripled compared to pre-pandemic prices.Not a big surprise that magnesium was on the agenda of the recent EU Council meeting, as it could have "wide-ranging implications for the whole value chain in the European Union".According to the analysts at IHS, a significant shortage of magnesium would have an unforeseeable impact on the manufacture of vehicles and components.Problem: due to the increasing number of electrified vehicles, the demand for raw materials such as cobalt, nickel or aluminum is increasing."In 2017, for the first time, humanity consumed more than 100 billion tons of raw materials within a year - we must also counteract this trend in the automotive industry," says BMW CEO Oliver Zipse, "this is not just about ecological sustainability, but also about economic sustainability - and thus a strategic dimension, because the current development of raw material prices shows what effects an industry that is dependent on limited resources must expect."Magnesium is considered to be the lightest of its kind among the materials commonly used in structural applications. It is about a third lighter than aluminum and has the most desirable property of being able to bond easily with other elements.The applications of magnesium in automotive construction began, as with many lightweight materials in racing cars, where the material was used for some components as early as the 1920s.Most of the material is extracted from natural minerals such as dolomite and magnesite, and extraction is typically accomplished by two processes, both of which require high energy inputs and generate high emissions: the pidgeon process and the electrolysis process, one of which is derived from the mineral dolomite and the other from magnesium chloride.In the automotive industry, magnesium plays an important role, primarily in aluminum alloys.These alloys have been recycled to a large extent in the automotive industry value chain for years.In the automotive industry value chain, a large part of the demand for wrought alloys is met by aluminum sheets used in body construction.The origin of the concern lies in mainland China, which accounted for 85 percent of global production of magnesium metal in 2020.In particular, there is the province of Shaanxi, which contributed 63.5 percent of the total production with 0.61 million tons.In order to reduce the share of energy consumption in GDP per capita growth by 2 percent in the third quarter and by 3.2 percent for the whole of 2021, the city of Yulin in Shaanxi has industrial plants, including magnesium plants, which are classified as high-emission plants. requested to either shut down completely or operate at only 50 percent of production capacity in the last two weeks of the third quarter.Most magnesium plants have resumed operations since early October, despite originally being told to operate at only about 40 percent of capacity through the end of this calendar year.This has triggered fears of an imminent material shortage, particularly in the automotive industry."The concern that if it goes on for a few months that there could be a material shortage is reasonable," said John Mothersole, IHS Markit's commercial director, pricing and purchasing.However, there are signs that mandated production cuts are being eased in China, as output in Shaanxi province has surged to about 70 percent of levels recorded in the first half of the year.Prices in mainland China and Europe have subsequently started falling, although they are still double or more than double June levels in both regions.After all, no bottlenecks in aluminum have been reported so far.Most plants in the Chinese province will be operating at 40 percent production capacity by the end of the year.Beyond the next quarter of magnesium production, investments in energy capacity in Shaanxi province, easing of energy cuts or changes in prioritization of energy restrictions will determine the market direction for both magnesium availability and the cost basis of production.While policy relaxations could alleviate the supply chain bottleneck for this material, the energy intensive nature of magnesium production will not be impacted in the medium to long term.In order to reduce the energy requirement, extensive research and development work is required for each material production.Furthermore, there is no clear way to account for the fact that Shaanxi Province is responsible for the production of more than half of the world's magnesium supply."At worst, extended production cuts will inevitably lead to material shortages as capacity outside of Greater China will not be able to fill the gap in global supply," says Michael Tao, senior research analyst at IHS, "in this situation "there could be a cascade effect on the aluminum sector, although aluminum prices appear to be stable so far. We have had no confirmation as yet that this is the case, nor that aluminum producers are concerned about the magnesium situation. The next two months will be crucial to understand if this will lead to a similar development as seen with the semiconductor shortage or if it is an overreaction in the metals market.Meanwhile, also keep an eye on the long-term risks related to the supply be kept."A recent US Department of Defense study identified magnesium as one of the most important strategic minerals for the country.Such over-reliance on China might not bode well in the context of the economic decoupling pursued by the United States or Europe's "strategic autonomy" policy.In this context, it would be advisable for OEMs and suppliers to look for ways to reduce their long-term dependence on magnesium-intensive alloys.© G+J Medien GmbH