Magnesium is the lightest of the structural metals, yet world production of magnesium is small compared to other light structural metals, such as aluminium. Presently, just under half of the magnesium produced in the world goes into hardening and strengthening aluminium alloys, although other significant uses include the desulphurisation of steel, the inoculation of cast iron and its use as a chemical reagent.
Magnesium Recognised as a High Volume Structural Metal
However, there is another use for magnesium, one that is currently enjoying greatly increased demand - its use in cast metal components, particularly in the automotive sector. At a recent IMM commodity meeting, delegates discussing this topic presented magnesium as a material poised on the brink of breaking through to become a major high volume structural metal. Yet at the same time delegates recognised that there is a danger of losing momentum because of an unusual supply problem there is just too much new capacity!
Sources of Magnesium Oversupply
The irony of this dilemma is soon explained -the ‘too much new capacity’ problem stems from China. In 2001 China accounted for 43% of the world’s supply of primary magnesium - compared to only 4% of world supply in 1994. By the end of 2002, its share may well be 50% as China fills some of the gaps caused by the closures of major plants in Norway, the USA and France.
Market Prices for Magnesium
Predictably, the low price of Chinese magnesium has been the principal factor in this extraordinary rise to prominence. Prices for Chinese magnesium have plunged from levels of more than $2,600 per tonne in 1996 to levels below $1,300 per tonne in 2001/2002. Equally predictable has been the response from producers in the USA and Europe who initiated antidumping proceedings, only to find that Chinese prices went even lower causing domestic prices to fall to basement levels.
Anti-Dumping Actions Relating to Magnesium
The confirmation earlier this year that the closure of the EU’s only primary magnesium plant (Pechiney’s 17,000 tonnes per annum Marignac operation in France) would be permanent has removed the logic for maintaining anti-dumping duties in Europe - the removal of the duties themselves will surely follow. Meanwhile the USA’s sole remaining producer (US Magnesium now that Magcorp has gone into Chapter 11 bankruptcy proceedings) continues to fight its corner by pursuing anti-dumping action, not only against China but also against Canada, Israel and Russia, as well as anyone else who comes along.
The Low Specification Magnesium Market
The USA’s other producer in recent years was the Alcoa subsidiary, North West Alloys, which closed its plant in Washington state during 2001 through a combination of low priced Chinese imports and escalating power costs. In common with the Pechiney plant, it was primarily serving aluminium alloy markets (much of it in-house) - China has now become the dominant supplier to this, and to the other main tonnage sector in which quality requirements are not stringent, namely the steel desulphurisation sector.
The High Specification Magnesium Market
Meanwhile, the higher specification magnesium alloy sector is primarily served by producers in Canada, the USA, Israel and Russia. In 2001, die cast magnesium alloys accounted for more than 150,000 tonnes of Western world primary magnesium demand, up from only 30,000 tonnes per annum in the early 1990’s (according to International Magnesium data). This spectacular growth has been in response to demand from the automotive and consumer electronics sectors, and if sustained will see world magnesium markets exceeding 1 million tonnes per annum soon after 2010.
Magnesium Growth Areas
The underlying reasons for the recent and future growth in the automotive sector is simply a desire for lighter vehicles. Lighter vehicles require smaller engines, which in turn produce less pollution and are more efficient, as required by current and future emission regulations. There is another sub-sector, wrought magnesium products - essentially magnesium alloy sheet and extruded products - that is also considered to be entering a period of exceptional growth.
New Sources of Magnesium
The burgeoning demand for magnesium in automotive applications prompted a new wave of project announcements during the late 1990’s ‑ from Australia and Canada to the Netherlands, Iceland, Congo (Brazzaville), and the Middle East. One new plant has already entered production - the Magnola plant of Noranda in Canada although some difficulties have been experience through the introduction of new technology during a somewhat protracted commissioning period. A second new plant is now under construction in Queensland, Australia, and scheduled to enter production in 2005 (Australian Magnesium Corporation’s Stanwell project). A third is in the final stages of arranging financing (Magnesium International’s Samag project in South Australia) and, if as expected construction begins in early 2003, this could also enter production in 2005. All three of the new plants are aiming to produce not only pure magnesium but also magnesium alloy, and have their sights clearly focused on serving the structural sector. Together they will add around 225,000 tonnes per annum of new capacity to the market - a third of world total output in 2001. When other projects, such as the Latrobe Magnesium Project plant are included in these calculations, Australia will challenge China as the world’s largest producer of magnesium.
Future Trends for the Magnesium Market
Clearly, some swings in the supply and demand balance are to be expected during the next five years and it will require some nerve from both existing and new producers in order to establish the higher volume magnesium market of the future. One thing is clear - the market will remain competitive while China remains a significant factor. Chinese material will also be involved in the alloy sector of the market - particularly when its products are reprocessed and upgraded by Western specialists such as Norsk Hydro. However, the automotive industry will not put all its eggs in one Chinese basket. For the automotive industry to keep its nerve and commit to magnesium alloy parts it is vital that the new entrants meet their objectives in being able to supply high-quality products at low-cost.
Current signs are that the new large-scale Australian plants (based on continuous electrolytic processes) will have operating costs that are equivalent to the best Chinese producers (based on small-scale batch thermal processes), providing superior quality and service too. Their costs are also likely to go down (through process efficiencies and larger-scale operating after expansion), while Chinese costs will increase through higher energy, raw material, labour and social costs. The high volume future of magnesium depends on a healthy supply from diverse sources - Australia, Canada, and other Western sources, as well as Russia and China - and on processes that provide sufficient returns to producers yet make magnesium competitive with alternative materials such as steel and aluminium.