Europe magnesium supply uncertain despite inclusion in ‘ambitious but doable’ CRMA: sources
Despite the metal being classed as “strategic” in the European Union’s proposed Critical Raw Materials Act (CRMA), questions remain about the future of magnesium supply in Europe, market participants have told Fastmarkets
The proposed act, published on March 16, designates magnesium as a strategic material and lays out a number of supply and production targets and quotas to be reached by 2030 to help guarantee the supply of the metal.
In exclusive comments to Fastmarkets, Verde Magnesium, which aims to become the EU’s first dedicated primary metallic magnesium producer, described these targets and quotas as “ambitious but doable.”
The company hopes to begin magnesium production in Romania in 2025, subject to the issuance of a mining license tender.
Still, the company warned that the development of magnesium and other critical raw materials (CRM) projects in Europe is challenging for two key reasons: regulatory bottlenecks, given permitting required in various member states, and the cost structure gap between products manufactured in the EU and imports.
Martin Tauber, European Representative for the International Magnesium Association (IMA), also welcomed the act while warning that further action needs to be taken.
Tauber laid out elements that he said would be required for the success of the European magnesium sector:
- A green and sustainable primary production process;
- Access to sustainable mining and raw materials;
- Access to long-term and renewable energy;
- Downstream industrial commitment; and
- Financial support through funding capital programs.
“In principle, it is a good proposal heading in the right direction, but the current version is very general and deals with a wide range of steps in the industrial chain,” he said, adding: “The time frame of implementation is too long… Magnesium needs some short-term support actions.”
One market participant, a metal scrap recycler active in magnesium, indicated that existing participants in the European magnesium market do not appear to be particularly engaged with the proposal.
“Frankly speaking, I think market participants didn’t really have this on their radar,” that source said.
In particular, that market participant was concerned about the financial viability of a local magnesium-producing sector.
“Who’s going to pay for it, and will customers be willing to pay [the inevitable] premium on locally produced material?” the source asked.
Cost, regulatory challenges
Europe has no domestic primary magnesium production, and any projects in the region would face higher input costs compared with imports, according to Verde Magnesium.
“Production of low-carbon/green products involves significant R&D [research and development] efforts, the implementation of the most modern technologies, renewable energy sources, employment of a highly qualified workforce, investment in environmental protection and remediation measures, doubled by the support for the reliable development of local communities in the area of the projects,” the company said.
In contrast, imports may be “produced under lighter regulations, using polluting technologies and fossil fuel-based energy while neglecting environmental protection,” the company said.
Those higher costs for EU projects “should pay back over time,” however, given “lower transport costs, more robust supply, investments, local employment, R&D and fewer environmental costs,” according to Verde Magnesium.
Verde Magnesium likewise called for the EU’s CRM Board to be empowered to “get involved in lifting the regulatory bottlenecks by mediating, transferring best practices, and streamline communication between project developer and authorities in charge.”
It also needs to “identify and propose to [the European Commission] the implementation of the best measures to level the playing field and safeguard EU producers against unfair competition of imports,” Verde Magnesium said.
Without these measures, the company warned that the development of other CRM projects in the EU will face a “more lengthy process,” which will “not be able to meet urgent procurement demands.”
In the meantime, the company hailed a number of milestones reached over the last years and expressed hope that the CRM Act would encourage Romanian authorities to “finally restart the public tender process for mining licenses.”
Other markets, regions
China is the leading global supplier of magnesium, providing 90% of global supply, according to the US Geological Survey (USGS), and an even larger proportion of Europe’s consumption.
In a statement from 2021, leading European industry associations indicated that 95% of Europe’s magnesium supply was imported from China.
That year, environmental issues and rising coal costs at Chinese smelters contributed to an acute shortage of the material in Europe. As a result, spot prices soared in September and October 2021 before stabilizing lower.
Fastmarkets’ price assessment for magnesium 99.9%, in-whs Rotterdam reached a record high at $16,000-16,500 per tonne in early October 2021, up from $4,300-4,625 per tonne in late August 2021. The price then fell sharply to $6,000-10,000 per tonne on November 5, 2021.
Fastmarkets most recently assessed the price at $3,095-3,400 per tonne on March 24.
And the risks of Europe of relying exclusively on China for its magnesium supply are not limited to the magnesium market, sources said.
At the time, a source said the late-2021 magnesium supply crisis was a “nice big cherry on top” of the rising energy costs that roiled the aluminium sector, pushing prices for secondary magnesium-silicon aluminium alloys to what was then an all-time high.
Fastmarkets’ price for aluminium pressure diecasting ingot DIN226/A380, delivered Europe reached €2,750-2,900 ($3,190-3,364) per tonne on October 15, 2021, up from €1,970-2,040 in early September. The price was most recently assessed at €2,200-2,260 per tonne on March 24.
A drive to secure a reliable supply of magnesium is also under way in North America, with a number of traders and distributors signing agreements to distribute material produced in other countries.
This includes a deal between CCMA and Western Magnesium in Canada to supply 25,000 tonnes of future production to the United States, and a similar deal between Latrobe Magnesium and Metal Exchange Corp of Missouri.