Chinese experts are calling on the domestic magnesium industry to accelerate the research and development of magnesium alloy technology and products to undergo the financial crisis.
Magnesium metal enterprises suffer great loss
China, as a big country in term of magnesium resources, production capacity, output and export in the world, has reported a fast reduction of magnesium orders. Many provinces' exports have more than halved, and some written up quarterly orders were rescheduled for a month-by-month order basis.
Shanxi, one of the largest producers of magnesium in China, exported 24,800 tons in the first five months of this year, dipping 71.6 percent year on year. The export value amounted to approximately 70 million U.S. dollars, down 78.9 percent, dragging down the province's exports by 7.1 percentage points.
Ma Jinting, general manager of Ningxia Taifeng Magnesium Industry Co., Ltd., said that the factory's production capacity during the first half was 12,000 tons, but that the operational rate was less than 50 percent, while output was about 2,000 tons.
Besides, the price of magnesium ingots was 38,000 yuan/ton during June 2008, and has since dropped to less than 15,000 yuan/ton, pushing the company into losses of 1,000 to 2,000 yuan/ton.
The retreat of magnesium ingot prices was attributed to fallen demand in European and American markets, where the automotive industry was weakened by the financial crisis, and accordingly requiring less magnesium alloy.
About 80 percent of China's magnesium ingot relies on export, and domestic market is less developed to consume too many magnesium products, leading to the industry's low operation rate, or even off production.
Qin Jie, general manager of Ningxia Zhongning Shengdehua Magnesium Industry Co., Ltd., said that the price of magnesium ingots is still declining, and many enterprises' costs are 17,000 yuan/ton. The situation has flared price war in some regions.
Magnesium product prices will linger at a low level during 2009, and enterprises' production won't recover to normal in the short run, estimated Qin.
Expanded industrial investment leads to higher risks
China's magnesium metal investments have expanded over the past two years. Ningxia, Shaanxi and Qinghai provinces all introduced projects with high production capacities.
However, the majority of investments focus on the field of raw magnesium production, rather than products with high added value.
Although the domestic market developed with increased demand for magnesium alloy used in products such as automobiles, motorcycles, aircrafts and laptops, most enterprises were less inclined to invest in high-end magnesium alloy products. The lack of inclination is attributable to technological difficulties and market uncertainty.
It's feared that China's magnesium production capacity will double within several years, leading wasted resources and capital, granted that the industry's R&D and applications still lag behind.
Supportive policies for downstream magnesium alloy needed
Because China's processing technologies are weak, the country lacks of magnesium pricing right. The country produced 630,000 tons of magnesium metal in 2008, accounting to 85 percent of the world's total output.
Compared to developed countries, China's application scale of magnesium alloy was limited with relatively higher prices, restraining enterprises from injecting considerable capital into new product development.
However, some experts said the use of magnesium alloy will help produce lighter automobiles, which due to environmental regulations are becoming ever more important. The country is also expected to emphasize the R&D of downstream products, rather than expanding industrial scale.
China must now reinforce capital supports for some qualified enterprises and assist them in upgrading their technology over the long run, cultivate professionals and establish a public R&D platform for magnesium alloy. It must also consider designing policies to provide a stable domestic market for magnesium alloy enterprises. – China Mining
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