Not Just Chip Shortage, Magnesium A Threat To Automotive Production

Not Just Chip Shortage, Magnesium Now A Threat To Global Automotive Production

Parth Dutt
Industry Insights
Est. Reading Time:
4 mins

Not Just Chip Shortage, Magnesium Now A Threat To Global Automotive Production

Parth Dutt

The cars we drive every day, our prized possessions, comprise of many, many parts. While some may be more visible and in your face and others might be smaller and easier to miss, all these parts are very crucial for the manufacturing of a car. As we all know, most things are greater than the sum of their parts, and that’s exactly what a vehicle is. All these crucial elements, big and small, add up to create magic.

As our cars evolved, the use of semiconductor chips in the car also increased. These chips are responsible for controlling various operations while driving. As the semiconductors usually look after the internal operations and functions, the metal body is responsible for providing rigidity to the external structure.

As we have previously reported, the automotive industry has been and is currently facing an extreme semiconductor chip shortage. The problems caused by the existing shortage of semiconductor is now bound to increase manifold as it will now be coupled with the shortage of magnesium. What is worse is that this may lead to a complete halt in the entire auto industry.

Car Parts

The global shortage of magnesium is amplifying the current dreaded situation in the auto industry. Magnesium is an essential commodity for the automotive industry. The most visual application of magnesium we can see is in the aluminium alloys. This alloy is used where we need strength but lighter weight properties. This global shortage of magnesium can be visualized better when we look at the car parts where it is used. The parts where magnesium is used are body panels, suspension plates, brakes, brackets, engine block, fuel tanks, crossmembers, axles, impact beams, wheels, unibody structures, etc. Now we clearly understand what the shortage will mean for the automotive industry, and that is a complete breakdown in manufacturing. The cars that are manufactured are basically built upon aluminium, and in order to work with aluminium, magnesium is required. It’s essential.

Amos Fletcher, a renowned analyst at Barclays, said, “If magnesium supply stops, the entire auto industry will potentially be forced to stop.”

Sadly, the auto industry does not have much time left with magnesium. One of the reasons for the shortage of magnesium is the energy crisis in China. This crisis has led to many factories in China to shut down in order to reduce power consumption.

China is the world’s biggest supplier of magnesium, churning out about 85 percent of the world’s supply. China has a stronghold over magnesium supply, and the biggest magnesium producing city in China is Yulin, which has directed the huge chunk of production facilities to shut down. They have ordered thirty five out of fifty such facilities to halt their production. Moreover, the remaining fifteen were ordered to cut their production by half. Those that have resumed output arent churning out as much as was hoped; thus, the shortage, as it appears, will continue. The soaring high prices have significantly reduced. However, they’re still twice what their value was in January.

The European automakers have, however, made it abundantly clear that the magnesium shortage is unlikely to affect them in any major way. They have reassured stakeholders that the current shortage is not a threat to their current production plans for now. There are some European reserves that are expected to run dry by November end. Making vehicles lighter is particularly useful for extending the driving range of electric vehicles, crucial for Europe’s energy transition plans. Chip shortages have already extended delivery times for new cars, sometimes up to a year. Without a speedy recovery in China’s magnesium exports, those queues could lengthen, an auto industry source said. Like China, the US too produces magnesium, though the situation in the United States is a bit relaxed as of now. The American auto industry will continue to produce cars as long as they solve the semiconductor shortage.

Not only the production but the storage of this element is very critical and also a reason for the global shortage. The life span of magnesium is very small on its own, it oxidizes quickly. This is the reason why magnesium is very difficult to store.

There isn’t an immediate fix for the industry against these shortages, the situation of the auto industry is expected to improve over the course of time. However, the upcoming few months are going to be very tough for the auto industries across the globe. Most companies are maintaining that their reserves and the magnesium that is already in transit will see them through into the next year, but chances are bleak.

Auto firms Stellantis and BMW have issued statements claiming that this shortage is not going to affect them in the near future. They do, however, maintain that a shortage is imminent. Volkswagen’s head of purchasing in an earnings call said a shortage was expected.

“We cannot forecast right now if the shortage on magnesium, which will happen definitely according to planning, will be bigger than the semiconductor shortage,” Volkswagen’s Murat Aksel said.

Industry titans are still perplexed, figuring out ways to outrun this global shortage, but with little to no progress.

“We are very concerned this is going to impact us in a couple of weeks,” Jonathan O`Riordan, international trade director of Europe`s automobile manufacturer association ACEA, told Reuters.

“It`s the calm before the storm,” said Teresa Schad, a spokesperson for Germany`s metal association, WV Metalle.