CRITICAL MINERALSMagnesium Market Highlights Continuing Fragility of Global Supply Chains
Magnesium is a critical input for major and emerging economies’ economic and industrial development. It has diverse high-tech applications in a wide range of sectors, from renewable energy to aerospace, defense to transport, and telecommunications to agriculture. The problem is that for both industry and governments, magnesium supply chains are vulnerable to sudden disruptions.
Vast and, more often than not, hidden supply and value chains underpin modern Australian life. We’ve become accustomed to, if not overly confident in, the ability of markets to meet our every need and want. Covid-19 and a series of concurrent natural disasters have left us with a nagging feeling that things might not really be so rosy. It’s become painfully apparent that some countries won’t always act in the interest of open global trade.
Addressing this challenge requires some big, new policy thinking. Global magnesium supply chains illustrate how difficult that will be.
The supply and value chains for magnesium are a long way from the minds of average Australians. Many would assume that because Australia is a bulk mineral ore exporter without a significant manufacturing base, there’s no need for magnesium to be a concern. That assumption is wrong.
Magnesium is a critical input for major and emerging economies’ economic and industrial development. It has diverse high-tech applications in a wide range of sectors, from renewable energy to aerospace, defense to transport, and telecommunications to agriculture. The global demand for aluminum alloys, made from magnesium, is increasing. Magnesium is critical to the growing market for electric vehicles since its light weight helps to increase their range.
However, for industry and sometimes governments, magnesium supply chains are vulnerable to sudden disruptions.
By 2019, China had become the dominant producer of magnesium, capturing a 94percentshare of the global export market. Its companies produce magnesium at prices that no other market can match.
Chinese companies have avoided the temptation of using market share to set high prices. Instead, they have set prices that present competitors with high barriers to market entry. The low prices have been a windfall for both manufacturers and consumers, and have helped further entrench China’s market dominance.
Interestingly, our understanding of the supply-chain vulnerabilities created by this arrangement wasn’t driven by increasing strategic uncertainty but by Chinese domestic policy.
As early as 2006, the Chinese government had become concerned about energy security in light of China’s growing economy. In 2016, it introduced a dual-control policy focused on reducing energy intensity and limiting overall consumption. However, the policy wasn’t afforded any real priority, so it had a limited impact.
