If you regularly visit our blog, you know very well that recently we have devoted quite a lot of space to the issue of supply chains and the risks of their interruption. As it turned out, however, this is not the only problem that the world is currently struggling with.
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The aforementioned supply chains have been extremely tense for many months, and the increasing problems with the delivery of goods, as well as the shortage of container ships that should transport them, generate real losses. A few weeks ago, President Joe Biden himself and his administration had to join the action, which means that the situation has become a real emergency. Supply gaps are large, which not only causes a shortage of essential components in many industries, but - a bit more mundane - means that many of the products ordered may not reach their destination before the upcoming holidays.
A precious metal
It turned out that one fire on global markets has not yet been extinguished, and it is already necessary to rush with water to the next. This time it is about the disturbing news from distant China, where we are dealing with a huge energy crisis. This is important because this country is responsible for as much as 85 percent of the world's magnesium production.
The professional website "mining.com" informed that the Chinese will have to close 35 out of 50 of their magnesium smelters by the end of 2021, and this in turn will translate not only into the prices of this metal, but also its availability on the markets. Even at the beginning of the year, a ton of magnesium cost about $ 2,000, while today the prices reach a dizzying level of even $ 14,000, and this may still not be the end of the increases.
Problems with the availability of magnesium can have a serious impact on many industries, but it is no secret that the automotive sector will suffer the most, which due to the pandemic and the shortage on the chip market is still experiencing a great crisis. Today, buying your dream car can be problematic, and the increase in car prices and the extended delivery time are one of the hallmarks of the industry in crisis.
The ball on the side of the Chinese
As in the case of a huge congestion at the largest unloading port in the world - Los Angeles \ Long Beach - the aforementioned president of the United States reacted, so European leaders react to the black clouds approaching from behind the Great Wall. We are, of course, talking about German Chancellor Angela Merkel, and also Andrej Babis, Prime Minister of the Czech Republic. In both cases, they are talking about the end of their term of office, but also about countries where the automotive industry is a very strong branch of the economy. Shortages on the magnesium market may make this ore simply unavailable by the end of the year, and it is no wonder that this topic was raised at the European Union summit.
- We are in talks with our Chinese partners to find a solution that will remedy the shortages and allow for the development of long-term plans - European Commission spokesman Eric Mamer announced in an interview with Reuters. - Failure to solve this problem threatens thousands of companies across Europe, as well as supply chains and - most importantly - millions of jobs. The consequences can therefore be catastrophic - he added.
Someone might ask at this point about potential stocks, which should be accumulated for such circumstances. And they were probably right, but not with magnesium. The storage of this ore is very difficult due to its properties. After just three months, magnesium begins to oxidize and if China does not resume its production on the same scale as before in the coming weeks, its stocks will run out by the end of the year.
For the automotive industry, this is news that sounds like the worst nightmare. However, it should be remembered that if the worst-case scenario turns out to be true, not only car manufacturers will suffer, but also all related industries, closely related to them. In such a situation, it remains to wait for the Chinese movement.
