Catastrophe looms as Chinese magnesium shortages threaten European packaging industry
25 Oct 2021 --- A critical shortage in the global magnesium supply is threatening to “catastrophically” derail the European packaging industry after the Chinese government began slowing production to reduce the country’s energy consumption.
Magnesium is an essential alloy for producing packaging materials like steel and glass.
Europe’s industry associations, including Metal Packaging Europe, are calling on the EU to take urgent action to protect millions of jobs, thousands of businesses and entire supply chains relying on magnesium supplies.
Warnings of “Europe-wide production shutdowns” are motivating other associations to join the call for policy action, including European Aluminium, Eurofer, European Automobile Manufacturers Association, Eurometaux and industriAll.
More recently, European Aluminium told PackagingInsights a slight drop in skyrocketing magnesium prices is failing to allay fears of “catastrophe” in the European metal packaging industry. Moreover, Kelly Roegies, European Aluminium’s communications manager, explained continued disruption in the magnesium market could potentially result in higher carbon footprint through increased Chinese primary aluminum imports.
Why magnesium is so important
Magnesium is a key alloying material widely used in the metals-producing industry. Without urgent action by the EU, industry critics fear the situation could cause economic dependence on Chinese production and future embarrassment for the EU.
The EU is already almost entirely reliant on Chinese magnesium production, with roughly 95% of European magnesium originating in the country, according to the European industry joint statement.
The drop in magnesium supplies results from the Chinese government shutting down factories in attempts to slash domestic power consumption as energy reserves plummet, according to news outlet Politico EU.
This drop-in Chinese magnesium production began in September 2021 and has resulted in an international supply crisis of “unprecedented magnitude,” according to a cross-industry letter addressed to the EU.
China supplies Europe with roughly 95% of its magnesium.
Record price rise
The remaining magnesium imports are trading at “extortionate” prices, over five times higher than earlier this year, at about US$10,000 to US$14,000, up from approximately US$2,000.
This price increase makes it almost impossible for European companies to produce or source magnesium-containing materials at a viable level, say industry representatives.
Europe is expected to completely run out of magnesium stocks by the end of November, with production shortages, business closures and associated job losses to follow.
The packaging industry and others are jointly calling on the EU Commission and national governments to urgently work toward immediate actions with their Chinese counterparts to mitigate the short-term, critical shortage issue and longer-term impacts.
Packaging dependency
Despite fears of layoffs, economic collapse and continued reliance on the Chinese government, policy officials are offering assurances the situation will come to a swift end.
According to German news reports, Sun Qian, general secretary of the China Magnesium Association, says the shortage would only be short-lived and China wouldn’t ban magnesium exports.
However, European competitors in the magnesium market fear the Chinese monopoly over the material will continue and have accused the country of using large-scale magnesium dumping in Europe to create an economic dependence.
By Louis Gore-Langton
