China dominates global supply, but internal competition is often overlooked
Production of primary magnesium continues to be dominated by China, which Roskill estimates accounted for 75% of global output in 2012. Russia and the USA together represent a further 16%, followed by smaller contributions from Israel, Kazakhstan, Brazil, Serbia and the Ukraine. Malaysia and South Korea have entered the market in recent years, albeit on a small scale, but these and some limited expansions at existing operations have done little to dampen China’s growing share. Secondary magnesium, output of which totalled 211kt, is sourced mainly from die-cast scrap. For secondary material, North America is the main contributor to secondary supply, followed by Europe, as these regions remain large magnesium-based product users.China’s leading position in primary magnesium output reflects the domestic availability and low cost of ferrosilicon and energy (in the form of coal, coke and electricity), which are the main inputs to the energy-intensive, thermal Pidgeon process favoured in China. Nevertheless, faced with rising energy prices and government pressures to lower emissions, Chinese magnesium companies have invested in process optimisation to lower costs. Although China is often viewed as one entity when considering magnesium supply, internally the industry is also highly competitive, with recent increases in coke-gas availability resulting in a shift in domestic output to Shaanxi, thus limiting growth in Shanxi and Ningxia and resulting in the loss of output elsewhere.The low CAPEX of Pidgeon process plants means a shift in domestic output from province to province is relatively straightforward, but has resulted in significant overcapacity. Roskill estimates Chinese primary capacity at 1.3Mt, but of that only 0.8-0.9Mt is utilised; the remainder is mothballed or uneconomic. This trend caused at least one major producer in China to shutter output in 2012, and is also a factor driving industry consolidationDespite cost competitiveness and overcapacity in China, a new 100ktpy electrolytic plant in Qinghai is due to open during 2013, which could further alter the domestic landscape. Several companies using new processes, or variations on existing electrolytic and thermal methods, also continue to investigate primary magnesium production in other countries, especially Australia and Canada. However, unless these projects can compete with Chinese Pidgeon process costs and be economic at current and forecast near-term pricing levels of US$2,500-3,000/t, China looks set to steadily increase its share of the market as demand grows.