Roskill examines magnesium market

China’s continued domination of the magnesium market sets the tone for the economics of the metal, which almost doubled in price in 2007, according to a new report issued by London-based international metals and minerals researchers Roskill.

The report, available from the group’s website for a fee, blames a serious lack of economically viable magnesium projects in the West.

“Virtually all new magnesium projects outside China investigated or implemented in the last few years, have either been abandoned or put on maintenance because they are not economically attractive in the face of Chinese competition,” reads the report.

Take for example, Norwegian company Norsk Hydro’s magnesium plant in Becancour, Que. The company dismantled its plant, admitting defeat against stiff international competition. The closure followed several others in the West since 1998, leaving only six significant primary magnesium producers outside China, two of which produce for their own use.

According to the analysis, Chinese production accounted for 77% of global output of 860,000 tonnes in 2007.

MagMetals, a subsidiary of MagIndustries holds one of the last “outposts” for supply, says the report.

The Kouilou magnesium project, located near the deepwater port of Pointe Noire, in the Republic of Congo, is expected to produce 72,000 tonnes per year of primary magnesium as a coproduct of potash.

But this amount is miniscule compared with the 200,000 tonnes per year of new capacity brought on-line in China in 2007.

The report points out China’s domination of the magnesium industry is rooted in the country’s automobile-driven industry. Magnesium alloy die-cast parts and components used in vehicles surpassed the light metal’s use as a minor alloying addition in aluminum in the early 2000s. China consumed 30% or about 250,000 tonnes of the world’s magnesium in 2007, making it, by far, the largest consumer of magnesium in the world. Magnesium die-casting demand in China, which doubled in 2006, is rising as private car ownership increases over the 50% mark.

Magnesium is produced in China using the Pidgeon process, a change from the electrolytic process favoured by Western producers, such as the U. S.

Production

The Pidgeon process has been widely modernized using large, computer-controlled rotary kilns, coke oven gas or coal-water mixtures instead of direct combustion of coal. Recycling of exhaust gasses is also used to provide extra heat for both reduction and refining furnaces.

Despite differing methods, production of primary magnesium increased to 757,000 tonnes in 2006 from about 485,000 tonnes in 2002, an average year-on-year increase of 7%. In 2007, 860,000 tonnes of primary magnesium was produced worldwide.

Another significant source of magnesium is from recycled alloys and aluminum alloys. The United States supplies 40% of all secondary magnesium.

Production of primary magnesium in China rose to 660,000 tonnes in 2007 from 76,000 tonnes in 1997, for an average year-onyear increase of 26%. Although the majority of Chinese capacity is located in small plants, output from plants producing more than 10,000 tonnes per year increased to 70% in 2006 from 46% in 2000.

Consumption

Between 2002 and 2005, magnesium demand increased to about 800,000 tonnes.

In 2006, consumption levelled out, despite the rising demand in China. The report credits falling demand in the U. S. and Europe. In 2007, consumption increased by 60%.

The U. S., which accounts for 20% of magnesium demand, is followed by Japan, Canada, Italy and Germany in terms of consumption.

The packaging industry continues to reign, accounting for half of the magnesium demand of the aluminum industry. The transport industry, the largest consumer of aluminum, is probably the second largest market for magnesium, using it as an alloy in aluminum.

–This is an edited version of the summary. The Economics of Magnesium Metal (10th Edition 2008) is available for purchase at www.roskill.co.uk.