Source: Politico, 2021-10-22
Fears are growing among European Leaders that the EU's industrial recovery from the pandemic is about to be undercut by yet another supply shock: a shortage of Chinese magnesium, which is vital to sectors such as cars, planes and electronics.
More than 95% of Europe's magnesium comes from China but the country is slashing back output amid nationwide energy shortages. China is, by far, the world's biggest producer, meaning it would be hard for smaller producers such as Russia and Israel to step in and fill huge shortfalls.
German Chancellor Angela Merkel and Czech Prime Minister Andrej Babiš — revealingly, leaders from top car-making countries — raised the issue on 21 October during an EU Leaders' summit, according to a Diplomat familiar with the discussion.
"Merkel said it's become too costly to produce it in China because of the high energy prices," the diplomat said, adding that the outgoing chancellor also warned about the knock-on effect on car production in Europe.
Babiš was even more direct, saying the auto sector is facing a "disaster."
"After the semiconductors crisis, now we have the magnesium crisis," Babiš said in the European Council summit, according to the diplomat.
China has built up close to a global monopoly of magnesium in the past two decades, having forced out European rivals through what its competitors describe as large-scale dumping. The subsequent dependence on China is yet another embarrassment to the EU as it tries to set itself on a course of "strategic autonomy" by breaking free of Asian and US supply chains.
The immediate problem is that China's factories are now partially closed owing to nationwide energy shortages, and exports of magnesium are plummeting. In the EU, stock of the mineral now risks running out by the end of November, according to a joint statement issued on 22 October by a dozen industry groups, including European Aluminium and the European Steel Association.
The groups warned about "far-reaching ramifications on entire European Union value chains," saying the construction and packaging industries are also feeling the heat. "Without urgent action by the European Union, this issue, if not resolved, threatens thousands of businesses across Europe, their entire supply chains, and the millions of jobs that rely on them," they said.
Beijing insists the shortage of magnesium will only be temporary. Sun Qian, general secretary of the China Magnesium Association, was quoted by the Frankfurter Allgemeine Zeitung, a German daily, saying the shortage would only be short-lived and that China wouldn’t ban the export of magnesium.
EU Officials said they had been in touch with their Chinese counterparts over the issue, but there are few guarantees from Beijing. “We are raising this issue with our Chinese counterparts in order to address immediate shortages and are assessing long-term solutions to tackle this strategic dependency," an EU Official said ahead of the EU Leaders' meeting.
The shortage also calls into question the EU Leaders' plans to put pressure on China to adopt drastic measures to cut the use of coal ahead of the upcoming international COP26 climate change conference in Glasgow in November. Coal will continue playing a major role in China's energy mix, in a bid by Beijing to stop the energy shortage causing power cuts during the winter.
Citing a conversation with Chinese Premier Li Keqiang this week, Merkel said he "asked the EU not to force China to close coal fired plants too soon," saying gas prices would face an "enormous increase."