*Magnesium Alloys for Sustainable Weight-Saving Approach: A Brief Market Overview, New… DOI: http://dx.doi.org/10.5772/intechopen.102777*

"limit pricing" strategy originally designed to deter entry to a "skim pricing" type of strategy that ultimately sacrificed the firm's viability as a magnesium producer [15].

Unlike Dow, other dominant firms have opted to expand tactically in related industries (e.g., DuPont in titanium dioxide and Alcoa in aluminum before 1945). One potential explanation is that Dow's cost advantage was not sustainable. Dow's production process benefited from years of incremental improvements but was not fundamentally different from the technology potentially available to others [15]. The Dow big electrolytic plants worked at an efficient scale in the decades after wartime characterized by modest demand for magnesium, and there were substantially no further opportunities for new efficient-scale plants until the U.S. But a radical change, as depicted, started with an automotive interest in magnesium at the beginning of the 1990s. Magnesium would switch its position in the marketplace from a specialty material with one dominant producer with considerable knowledge accumulated in 60 years into a commodity product with a competitive global market [15].

The rest of the story is like what happened to dominant Western countries firms in similar markets for commodity products. As the Cold War ended around 1990 and as the Chinese economic reform entered its Second Stage (the establishment of the Socialist Market Economy), individual Chinese enterprises were allowed to exist and to be protected by the law of the People's Republic of China. The primary market forces began to shift very rapidly in Western countries. In China, a multiplicity of low-investment production plants with the Pidgeon process were building at the minor technology scale. Hundreds of those plants based on a very high labor-intensive process were set up and ramped up very rapidly, in a few months, producing per capita just a few hundred metric tons per year. There was no Chinese knowledge at that time about magnesium alloying and alloys applications; those plants needed just to sell primary magnesium to the Western countries at almost their marginal cost. This new situation created confusion in the not-stabilized marketplace [3]. However, it is a fact that the Pidgeon process produced a significant amount of World War II magnesium. Those Pidgeon plants during wartime could not compete with the electrolytic process.

On the contrary, in the 1990s, when small Chinese plants started to supply 4% of the world's magnesium, Chinese labor cost was very low. In that period, Chinese-made magnesium was sold at about 0.72 USD/lb. while Dow's production cost was not less than 1.08 USD/lb. That magnesium price had been starting to crush the marketplace, a problem that never ended till that time. By far, the principal use of magnesium, almost 50%, that year was recorded in alloying the large numbers in the aluminum beverage cans sector, in which magnesium was (and is) used as a strengthening agent instead of in structural alloys for engineering applications.

Very soon, China, with its low prices, supplied 50% of World magnesium demand (**Figure 5**), becoming the world's largest supplier of primary magnesium. Between 2000 and 2010, magnesium production in China tripled, mainly due to the high costs of the process in the USA, Canada, France, and Norway. Most of the big magnesium plants in those countries were closed due to lower competitiveness. Despite the establishment of duties that could reduce imports, U.S. producers of magnesium began to exit the market. In 1998, Dow Chemical decided to leave the magnesium business, contracting a licensing deal for its technology to Samaj, a Pima Mining's subsidiary, for the South Australian magnesium project. Northwest Alloys Inc. closed its plant in Washington by 2001. Renco Metals Inc., the Magnesium Corporation of America parent, filed for chapter 11 bankruptcy in August 2001. In the same year, Norsk Hydro ended magnesium production in Norway, and after 6 years, in 2007, it ended its

**Figure 5.** *Evolution of magnesium production per region (1990–2017) [16].*

operation at Becancour, Canada. Noranda, which operated in Quebec the Magnolia electrolytic magnesium plant relied on serpentine tails from nearby asbestos mines, closed the smelter in 2003.

By 2015, more than 80% of the world's magnesium production took place in China, followed by Russia, Israel, and Kazakhstan, with only a few percent market share. In 2021, due to curbs in domestic power consumption, Chinese production of magnesium had been halted or curtailed to such an extent that deliveries to Europe have drastically dropped since 20 September 2021. In the second half of 2021, in the world's main magnesium production hubs, Shaanxi and Shanxi Provinces, 25 magnesium plants would have to shut down. Five other plants had to cut production by 50% amid China's power curbing rollout. With an 87% global share in magnesium production, the Chinese supply shortfall has already resulted in record prices, reaching the never recorded price of 6 Eur per kg and a worldwide global distortion in the supply chain.

The dependency on Chinese producers has created magnesium users worldwide a deadly embrace. Fluctuant prices over the 2000s depend on Chinese supplies. From the end of 2007 to the end of the first quarter of 2008, the average U.S. spot Western price increased significantly, as in China and Europe. Several factors contributed to these price escalations. In the United States, a decline in imports from Russia and Canada, two of the leading import sources, caused a supply shortage on the spot market. In China, increased prices for ferrosilicon, power, and transportation were causes for the rapid price increase [1]. In addition, environmental crackdowns by the Government of China may have led to shutdowns at some smaller and highly pollutant Pidgeon plants. In the United States, the Platts Metals Week U.S. spot Western price range reached a peak of USD 3.50 to USD 3.70, while in China, the magnesium price range reached a high of USD 5950 to USD 6250 per metric ton. The increased production cost of Chinese magnesium is firmly attributed to higher prices for raw

*Magnesium Alloys for Sustainable Weight-Saving Approach: A Brief Market Overview, New… DOI: http://dx.doi.org/10.5772/intechopen.102777*


### **Table 2.**

*Cost shares breakdown of primary magnesium and significant differences existing among the old Western big electrolytic plant and the small Pidgeon plants.*

material (main ferrosilicon), decreased production due to stricter environmental regulations at smelters and coal mines, increased labor costs, and an increase in coal power cost. **Table 2** represents the cost-shares breakdown of primary magnesium and significant differences between the old Western big electrolytic plant and the small Pidgeon plants powered by coal, primary actors of national magnesium production expansion in the first decade of the 2000s.

Though the raw material cost is essential, price stability is a much more relevant factor. For this reason, several projects are currently being developed to increase primary magnesium production capacity worldwide. In Nevada, United States, one company has obtained permission to build a pilot plant to test magnesium production from a dolomite deposit. In Quebec, Canada, a company started the construction of a secondary magnesium smelter. A company in Australia with a 3000 ton per year plant is going to be completed; it will recover magnesium from coal fly ash [17].

Now, let us go a bit in-depth about price concerns.

On the one hand, manufacturers are under the constant pressure of product costs that must be affordable; on the other hand, they cannot easily justify the use of bright material characterized by a (historical) uncertainty of supply over a medium-term period. **Figure 6** shows the price history of magnesium metal (US Market spot price) relative to magnesium and aluminum [USGS Bulletins]. On that source, it is crucial to notice that the ratio between magnesium and (primary) aluminum price has been over the ratio of 1.6, which is generally considered the affordable price ratio for magnesium versus aluminum, usually calculated by the inverse ratio densities of the two materials.

On the other hand, it would be more appropriate to consider the switching cost for each kg of steel that you would substitute with the alternative light metal for the same function. **Table 3** represents a viability study on the structural application of light metal alloy for manufacturing the automobile outdoor body panel that shall guarantee equal (or higher) stiffness and denting capability. To evaluate whether it is technically convenient to replace galvanized mild steel with lighter aluminum and magnesium metal alloys for stamping an outer door panel of a road vehicle, we need to know for alternative lightweight scenarios the substitution factors that are defined as the mass ratio between the lightweight (aluminum and magnesium) and the baseline (steel) component. The mass is obtained by multiplying the material density by the volume of the panel. Otherwise, the outer door panel volume is obtained by the front area of the panel that is usually fixed due to geometry constraints (e.g., the perimetral geometry defined by screen and center pillars) and the thickness of the panel sheet cold drawn.

### **Figure 6.**

*Yearly average U.S. market spot price for aluminum and magnesium [18].*


**Table 3.**

*Feasibility study about the affordability of lightweight solutions with aluminum and magnesium alloy for an outdoor body panel for the automobile; comparison with baseline steel scenario.*

*Magnesium Alloys for Sustainable Weight-Saving Approach: A Brief Market Overview, New… DOI: http://dx.doi.org/10.5772/intechopen.102777*

Furthermore, it is a multiple constraints problem: it is a strength-limited design problem with constraints in terms of the same (or higher) dent resistance and same (or higher) flexural stiffness of the panel. Under these circumstances, substitution factors for an aluminum alloy AA 5083 sheet cold drawn ranges 0.5–0.6, for a magnesium alloy AZ31D twin rolled cast sheet warm stamped ranges 0.4–0.5 (refer again to **Table 3**).

Thus, by calculating the material substitution factor for each light metal considered, we would evaluate how much is the switching cost of each kg of steel when it is substituted with 0.6 kg aluminum alloy or with 0.4 kg magnesium alloy. **Table 3** shows the switching costs per kg of steel in the case of both aluminum and magnesium solutions. Much more interesting is the line indicating the "steel parity" unitary material price (Euro/kg) for the outdoor panel: it represents how much it should be the unitary price for an alternative material to manufacture the body panel at the exact cost of the baseline case, the steel made pan.

Hence, the big question: is the steel parity cost the unique parameter to consider if magnesium is attractive as light material?
