Polish companies on the verge of bankruptcy? Another automotive crisis!

The automotive industry, which has been struggling with a crisis in the supply of semiconductors and a shortage of special steels for many months, has faced a new threat posed by a lack of magnesium. This metal is an essential component of aluminum alloys, which is one of the basic materials used in the production of engines, transmissions, steering systems and many other components.

The crisis sparked a sudden reduction of magnesium production in China, which have so far provided nearly 90 percent. the world supply of this metal. Most of the steel mills are located in the city Yulinwhere the authorities decided to close 35 out of 50 of these plants by the end of the year, and ordered the rest to cut production by half. China is struggling with an energy crisis, and magnesium smelting is extremely energy-intensive. To make matters worse, this metal is very difficult to store because it oxidizes quickly. Hence, if China had not stepped up production rapidly, this raw material would have dropped to a dramatically low level.

“Magnesium cannot be replaced, so the automotive industry could find itself in a catastrophic situation. Light alloys are used in many Polish factories. The lack of this raw material could therefore lead to downtime, which would entail a whole avalanche of consequences, such as problems for cooperators” – explains Tomasz Bęben, managing director of SDCM. “Most of them are small companies that do not have the financial reserves to survive the production stoppage,” he adds.

The problems with the supply of magnesium were reflected in the prices of this raw material. Magnesium imported to Europe more expensive in last weeks by 75 percent, reaching a record level of more than 9 thousand. dollars per ton. At some point WV Metalle, the German non-ferrous metals trade association estimated that Magnesium reserves in Germany and all over Europe will run out within a few weeks. There were also concerns that, due to the reduced magnesium production, China would limit its exports to dramatically low levels, meeting the needs of its own industry in the first place.

European Aluminum, an organization of European producers, asked the European Union and national governments to start urgent talks with the Chinese side. The memorandum stated that the current situation was a consequence of the risk taken by making the European economy dependent on the import of key components and raw materials from China.

Unlike the European Union, which relies fully on Chinese suppliers of magnesium, The United States kept its own productionalthough it is still not sufficient to fully meet the needs of American industry. “Undoubtedly, the economic policy of the EU requires the adoption of new solutions. Successive crises in supplies – first steel, then semiconductors, and now magnesium clearly show that the European industry requires strategic production in EU countries” – says Tomasz Bęben.

Currently, it seems unlikely that the EU and China will reach an agreement on magnesium production, but there are signs that China’s production is increasing again. For example, production in Shaanxi province has grown to 70 percent. the level of the first half of the year. Prices in Europe have stabilized as well, although they are still elevated. In turn, in the October survey CLEPA most vehicle manufacturers and parts manufacturers said they were primarily concerned about the first quarter of 2022. It therefore seems that they managed to get enough magnesium by the end of this year.

Therefore, there are positive signals, but it is not yet certain whether the above problems will not be felt at the beginning of 2022. At the same time, in the long run, a deeper reflection on the consequences of the dependence of the European market on the supply of this strategic raw material only from one, distant country is recommended.

About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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