Does Magnesium Justify Protectionism?

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MetalMiner has always held a strong free market philosophy.

Our belief is that in most cases, the benefits of lower-cost material to consumers outweighs the damage to domestic producers that global trade can bring. In our experience, calls for anti-dumping fines, import tariffs or quotas are nearly always brought by large industrial producers.  The losers are their customers in the thousands who are forced to pay higher prices than necessary and certainly higher than their competitors overseas.

However, we are not dogmatic and would accept that there may be exceptional circumstances where an industry is of such strategic value or the global supply sources are so unstable that for national security reasons, some form of protectionism is appropriate. Would we be happy if the domestic silicon producers serving the US chip market were forced out of business and the only remaining source of supply was North Korea? I don’t think so.

So does magnesium fall into this category?

Despite anti-dumping actions that have rumbled on since 2002 and punitive ad valorem rates of 17.86-21.71 percent being levied against Russian and Chinese producers, magnesium imports have still climbed 27 percent year over year, according to the USGS. However, even though the cost of dolomite from which the magnesium is extracted has not changed one cent, the price of magnesium metal has doubled over the last couple of years. Producers argue that the cost of ferro silicon and electricity have risen dramatically, and that without the anti-dumping tariffs, the one remaining producer, US Magnesium, would be forced out of business.

That may be the case, but is that worse than magnesium consumers in the US paying a substantial premium over Asian consumers? What is the net position to the US in terms of jobs, productivity and exports of finished products from paying an artificially high magnesium price?

Which brings us back to the question: is there a strategic reason why we should protect the remaining US producer? Magnesium is mainly used in high-strength aluminum alloys and in die-cast parts for automotive and aerospace applications – important, possibly strategic applications. But supply sources are varied and expanding. China (31%) and Russia (19%) have proved to be serious and stable suppliers, Israel (48%) for metal and (33%) alloy is the largest supply source and Canada (29%) for alloys are both above concern. In addition, Australia is making massive investments in new facilities with the latest technology which could see the country rival China in terms of low cost per ton. In truth, supply sources are numerous and from politically stable sources, therefore, we can not see an argument for depriving US magnesium consuming industries of competitively priced metal any longer.

So even under this case, we still say no to protectionism.

–Stuart Burns

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