Due to bottlenecks in important raw materials, there is apparently soon the threat of massive production downtimes, not only in the automotive industry. Recently, unlike in the first half of the year, production stops at German car manufacturers have resulted in some massive declines in sales.

While the recovery of the auto industry from the corona crisis continues to stall due to the chronic chip shortage, there is now a threat of new adversity in the supply chains due to the lower availability of aluminum and a lack of magnesium deliveries from China. This is where 85 percent of the magnesium consumed worldwide, which is used to alloy aluminum, comes from.

Since March 2021, global aluminum stocks have almost halved. “We are already hearing from the first suppliers and upstream suppliers that their aluminum stocks are currently shrinking rapidly,” the quoted said Handelsblatt Lars-Peter Häfele, raw materials expert at the consulting firm Inverto, which specializes in supply chains.

An aluminum shortage would be another blow to auto production, warned analysts at Bank of America (BofA). According to Reuters German carmakers were able to build up a thick financial cushion in the first half of the year. But no other industry in this country is as dependent on aluminum as the automotive industry.

According to Häfele, the aluminum bottleneck, like the chip crisis, will first affect the suppliers, and then the car manufacturers very quickly. In addition, the German industry is plagued by supply bottlenecks in the case of magnesium, which is urgently needed, among other things, for automotive and aircraft construction. Magnesium, which is around a third lighter than aluminum, is playing an increasingly important role. It is required in the entire aluminum value chain and affects sectors such as the automotive, aircraft, electric bicycle, construction and packaging industries, mechanical engineering and other magnesium processing areas such as die casting or iron and steel production.

According to Häfele, both aluminum and magnesium could become scarce at the beginning of next year: “That would then trigger massive production stoppages again.” According to the Metals Association, magnesium bottlenecks could even become noticeable by November 2021.

“It is expected that the current magnesium stocks in Germany, or in the whole of Europe, will be exhausted in a few weeks at the end of November 2021 at the latest,” warned the Metals Association in an October publication Position paper. The association appealed to the federal government to “urgently initiate diplomatic talks with China” in order to ensure supplies to German industry. Otherwise there was a risk of “massive production losses” in the event of a supply bottleneck of the extent feared. The association also refers to that
appropriate Chart the German Raw Materials Agency (DERA), which illustrates the drastic price increase of magnesium by 260 percent since August this year.

One of the reasons for the delivery bottleneck is, among other things, the goal of reducing emissions that are harmful to the climate. This is why this part of the world has recently been focusing more and more on e-mobility. But in order to achieve this goal, again, a multiple of the metals mentioned must be used, far more than, for example, in combustion engines.

Around 95 percent of Europe’s magnesium demand is currently covered by Chinese exports. However, in the course of its efforts to reduce its own energy consumption, China recently drastically reduced the production of magnesium – since large amounts of electricity are required for this. Some manufacturers in China will now have to cut production by the end of the year in order to save the electricity primarily generated by coal in China and to reduce CO2 emissions.

“Based on various sources, it can be assumed that at least 31 magnesium plants in the world’s most important magnesium production centers, the provinces of Shaanxi and Shanxi, have either been shut down or have had to reduce their production by 50 percent,” said the Metals Association.

According to a survey, companies in Germany were already struggling with the consequences of delivery bottlenecks in September. This was the result of the responses from around 2,400 small and medium-sized companies with a maximum turnover of 500 million euros, which were surveyed by GfK on behalf of the KfW banking group between September 1st and 10th. According to this, almost every second medium-sized company is affected by delivery bottlenecks. These “lay enormous stones for small and medium-sized companies on their way out of the Corona crisis,” reported KfW chief economist Fritzi Köhler-Geib. The manufacturing and construction industries are most affected, but trade and service providers are also affected. “This takes the momentum of the economy that has just picked up again,” said the chief economist of the state development bank.

According to the survey results, 48 ​​percent of the approximately 3.8 million medium-sized companies are struggling with the consequences of delivery problems. Every fourth company feels compelled to adjust the prices of its own products or services due to increased costs for raw materials and intermediate products. According to the survey, price increases are most common in the construction industry (61 percent).

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