October 27, 2021 – The EC has tried to find a simple solution to the magnesium crisis and, as expected, has failed to do so on a complex issue. China’s response to the demand to simply increase production was accordingly clear. Commodity markets are consolidating. And the Europeans are planning a ban on metal scrap exports through the back door.
Magnesium shortage: Simple solutions not to be expected
The European Union is on the world’s raw material drip. This has not only been known since a possible Chinese magnesium shortage. According to its own Critical Raw Material List, the EU is particularly dependent on China. This is where a large part of the raw materials it needs are bought at supposedly low prices, especially after the EU lost its last own producers to alleged dumping prices from China.
Level Playing Field turns into a boomerang for the EU
Suddenly, the game with cheap raw materials changes and the inflationary expression “level playing field”, which EU officials or domestic steel and aluminium producers like to use, suddenly comes into play. Only in a different way than the EU would have liked.
China is the EU’s most important supplier of raw materials
China, which for years has been accused by the West and especially by the Europeans of excessive fossil fuel consumption and of emitting the most CO2 emissions worldwide, is also responsible for the fact that Western industries still function on the domestic market at all. This is because China’s energy consumption and CO2 emissions are closely linked to global supply chains.
EC wants to solve complex problem with simple demands
The EC is now demanding that China increase its magnesium emissions to prevent a possible production stoppage in the EU. Justifiably, China has provided an expected response: it is not that simple.
Alternatives in the magnesium crisis?
None in sight at the moment. The global producers of magnesium have already signalled that little can be expected from them. Because not only Europe, but also other large aluminium and steel producers, such as India or the United States, are facing a very similar problem: Where can magnesium still be bought?
EC has no strategy in raw material supply
“It was more important for Brussels to push through its own promotional concerns instead of keeping an eye on the global supply chains and needs of its own economy,” Thorsten Gerber, CEO of the Gerber Group, said in this regard this morning. “Magnesium is at the top of the EC’s Critical Raw Material list. But no one in Brussels has yet delivered a strategy for diversification,” he continued, concluding, “A Fit for 55 title was more important to the EC instead of looking at solutions. What the EC is delivering here right now is already a refusal to work.”
Commodity markets consolidate
While the so-called experts are again singing of falling prices in industrial metals, we see more of a consolidation here in the current movements in the market. Especially in light of the recent wild swings, we think this is healthy and important. We should have a clearer picture on this in a few days.
EC could stop scrap exports from the EU this year
In the future, scrap will become one of the most important raw materials for European metal producers, such as steel and aluminium. For some time now, there have been efforts on the part of lobby groups to ban scrap metal exports from the EU in order to keep this important raw material in Europe. The European Commission is now wrapping this up for the benefit of its own industry in the guise of efforts to stop unnecessary transports of waste and thus improve the CO2 balance.
EC endangers EU recycling industry
The EC is once again endangering a complex part of the global supply chain and interfering in an issue it has not understood. This means that the next industry of its own, the recycling industry, is facing a probable existential end. With a ban on scrap exports, market participants will look for more economically viable regions. Perhaps the EC should just go on holiday again. Its own economy has already shown in the Corona pandemic that it is much better able to save itself without help from Brussels.
- Stainless Espresso: China – weather phenomenon La Nina comes at an ungood time
- Stainless Espresso: Magnesium – EU industry concerned about shortage
- Stainless Espresso: Nickel rally 2021 – What happened?
We at the Gerber Group have been trading in stainless steel worldwide for over 20 years. We are your experts when it comes to purchasing, import, logistics and services. Information is a vital part of this. Because only then can you and we make the right decisions. Do you have any questions? Contact us now.
Disclaimer: Many things here represent our opinion. Others are information from the Internet. We can therefore never claim to be correct or complete. And never base a business decision solely on the news you receive from us.