How interesting to see that at the same conference two contrary views of the magnesium industry could be aired. Hats off to the IMA for exploring both issues with such vigor.
On the one hand, stricter emission laws and the corresponding drive to reduce weight was cited as a reason why magnesium demand will increase in the long term. Magnesium can reduce the mass of a car by 20-40% more than aluminum, and hence play an important role in reducing the CO2 emissions for the vehicle. Lower weight equals smaller engine, which equals lower emissions. In addition, magnesium is 100% recyclable, an issue of growing importance in environmentally sensitive Europe. There, cars have to be 85% recyclable by weight, rising to 95% in 2015.
On the other hand, a paper from Mark Tucker, IMA president, painted a dire picture of the risks to the magnesium industry due to rapidly rising prices deterring automotive OEM’s from specifying the use of magnesium over aluminum. As magnesium prices have already doubled this year, Tucker observed with magnesium at $6000/ton and aluminum at $3000/ton how can we compete?” Once the material is specified in an automotive component, it is set for the five-year life of that program. As we have reported elsewhere, magnesium prices have been driven by Chinese demand and fear of supply disruptions. Even with signs that the Chinese economy may be cooling, the rate of growth is still over 8% per annum and as China moves into higher technology components, the demand for magnesium is unlikely to be reversed.
Is there a solution to this risk of an opportunity lost? In theory, a significant investment in domestic US magnesium production could help alleviate price pressures, so its interesting to see that Alcoa is stuying the possibility to re-open their Northwest Alloys primary smelter in Addy, Washington, idled in 2001. The smelter had a capacity of 30,000 tons per annum when it was closed. The solution, as with so many metals, lies in China. If demand does weaken or investment in new facilities increases, some easing in prices may result — but the reality is that many of those new automotive programs likely will utilize aluminum rather than its lighter but more expensive brother.