Disruptions and chaos in global supply chains continue to plague industries around the world, with the latest commodity that is seeing supply shortages being magnesium, a metal widely used in a number of industries such as aluminum alloys – all adding to increasing signs of the urgency to establish a global supply-chain coordination mechanism to find win-win solutions rather than pressing one side to fix the problem.
In Europe, industry groups, including metal producers, auto suppliers and the packaging sector, warned recently that the magnesium shortage may threaten thousands of businesses, supply chains and millions of jobs across the continent, as they are expected to run out of magnesium stocks by the end of November, Reuters reported.
In the US, Matalco Inc, the largest US producer of aluminum billet, warned about potential output downgrade due to the magnesium scarcity, while Alcoa Corp, the largest US maker of raw aluminum, also expressed concerns over the supply squeeze, Bloomberg reported.
The global shortage of magnesium has unsurprisingly put China in the spotlight. China produces about 75 percent of the world’s magnesium, and Europe buys around 90 percent of its magnesium from China, according to media reports.
In China, magnesium output has been affected by the country’s energy shortage and carbon reduction targets. That’s because production of magnesium requires intense electricity consumption and produces significant carbon emissions. It takes 35-40 megawatt-hours of electricity to produce one ton of magnesium, according to some estimates.
In order to curb power consumption amid the recent energy crunch, Chinese authorities last month called a halt to the production of many magnesium producers in Yulin, Northwest China’s Shaanxi Province, the country’s major magnesium production base. While most companies have resumed operations since early October, they were asked to run at about 40 percent of their normal capacity.
Given China’s push toward a less energy-intensive economy, it can be expected that local government authorities will roll out specific restrictions on the production of high energy-consumption industries like magnesium in the future, not just during times of energy shortage.
Over the years, the West has become accustomed to accusing China of consuming an excessive volume of fossil fuels and one of the world’s largest emitters of carbon dioxide emissions, but the magnesium scarcity may be an example explaining how China’s energy consumption and carbon emissions are intertwined with global supply chains.
Now with its ambitious goals of carbon peak and neutrality, China will undoubtedly engage in greater efforts to meet targets, which is bound to affect the production and supply of some products. As global supply chains face challenges of climate change targets, high inflation and logistics obstacles, it is unrealistic to expect China to fully meet the urgent needs of the European market. China’s efforts to tackle these challenges at its own pace are responsible and should be respected.
In this sense, the supply chain problems such as the magnesium shortage are not simple issues that can be resolved simply by increasing production. It is essential to establish an economic and trade consultation mechanism on the supply chain between China and the EU. Only through coordination and consultation can the needs of both sides be met.
