The Economics of Magnesium Metal, 9th edition.

Abstract

China emerges as dominant primary metal producer

The price of magnesium metal has been in slow decline since 1995 and has only recently (late 2003) started to recover. World consumption in 2003 was of the order of 660,000t, a significant rise from 338,000t used in 1993. If substantial capacity expansion plans are realised and the period of price stability continues, world capacity for primary metal should be around 670,000tpy by the end of 2004. There are two process technologies currently used commercially to produce primary metal; electrolysis of magnesium chloride and thermal reduction of magnesium carbonate ores with ferrosilicon. The conventional wisdom has been that thermal processes would gradually be replaced by electrolytic technology, however, in recent years there has been less incentive to invest in new electrolytic projects. In the early 1990s, around 76% of world capacity used an electrolytic process, while this figure had dropped to 54% in early 2003. Thermal technology is particularly well suited to use in a developing economy, as plant sizes are small, capital investment is low and the process is relatively labour intensive. In contrast electrolytic technology requires substantial capital investment, significant amounts of electric power and produces little waste. This trend is reflected in the number of sizeable electrolytic units in economically more developed countries that have been closed or idled and the remarkable increase in Chinese capacity. In 2003, Chinese primary production of magnesium was reported at almost 65% of the estimated world total, compared to less than 5% in 1994

Report Highlights

Magnesium can be used in a number of structural applications in the place of aluminium. In practise this substitution is only likely when the magnesium:aluminium price ratio is at or below 1.5:1. Between 1993 and 2003 this ratio declined from 2.7:1 to 1.64:1, however it is now starting to rise again. At higher ratios its use tends to be restricted to areas where other properties, such as lighter weight, offset its cost

.North America is the largest consuming region although growth in consumption at an average of 7.7%py during the past decade has been lower than that in either Western Europe (11.2%py) or Asia (12.2%py).

The use of magnesium in aluminium alloys is the largest end-use sector. The major application for these alloys is for use in beverage cans. Although aluminium cans compete with other packaging materials, such as glass, plastics and steel, its market share is not under serious threat. However, increasing levels of container recycling will temper the growth rate of magnesium.

The second largest use for magnesium is in die-casting, which saw the largest growth over the last decade. Magnesium components are increasingly used in automobiles to reduce weight and improve fuel economy. This trend is likely to continue, resulting in increased use of magnesium, although the growth rates in the demand for metal will probably be lower than it has been at 5%py to reach 265,000t in 2010.

Following the idling of the Magnola plant in April 2003, world capacity for primary metal was of the order of 570,000tpy. Substantial capacity expansions have been planned for 2004; if realised, world capacity for primary metal will be around 670,000tpy. Adding to this figure is some 230,000tpy of secondary metal, in theory world metal capacity is already sufficient at around 900,000tpy to meet projected demand in 2010. It is therefore easy to understand why investors are cautious about advancing new projects at this time.