Automotive Production Faces Another Catastrophic Material Shortage

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This time it is magnesium, and China produces 85% of the global output.

Following a dismal 2020 when the world was locked in due to a global pandemic, the automotive industry continues to suffer through a semiconductor chip shortage in 2021, which Mercedes-Benz thinks will only be resolved in 2023. Bad things tend to happen in threes, which means something else might be on the way.

According to the Financial Times, there is a magnesium shortage in China. Around 85% of the world's magnesium comes from China.

Magnesium is used in aluminum production, which means if there's a shortage of magnesium, a shortage of aluminum will be a direct result. Aluminum is widely used in automotive production and not just as fancy interior trim.

Aluminum is known for its strength and low weight, which is why manufacturers use it for body panels, frames, and significant components in engines and transmissions.

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For example, the Ford F-150 has an aluminum body, and it's used in Tesla Model S construction. Even Chevrolet makes the Corvette's structure out of aluminum. And the semiconductor shortage has already led to Ford cutting shifts at its manufacturing facilities. Most engine blocks are also aluminum, and only a few high-performance engines like Chevy's new 10-liter V8 use a cast-iron block.

The USA is somewhat protected by one sizeable domestic producer of magnesium. "Aluminium producers North America are also working their scrap supply chains very aggressively to make up for whatever raw magnesium they are not able to source," said research manager at commodities consultancy CRU, Stephen Williamson, to the Financial Times.

Automakers have kept mum on the topic, which is likely a good sign. The semiconductor shortage continues to halt production at various facilities, which consequently lowers the demand for aluminum.

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The sole producer of magnesium in the USA and recycling scrap aluminum is likely enough to satisfy demand locally. According to the Financial Times, manufacturers in Europe are already suffering as a result. This will likely have an impact on imported cars from Volkswagen, Audi, BMW, and Mercedes-Benz.

Both the best-selling truck and car are manufactured in the USA. The Ford F-150 has been assembled in the USA for decades, while Toyota started producing the RAV4 in the USA with the current model. Aluminum is used to construct both cars, though the facilities are not immune to other problems. Toyota's assembly line was halted earlier this year following another Covid-19 outbreak. Toyota is handling the semiconductor shortage better than most, but it still had to reduce global production by 40 percent.

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Source Credits: Financial Times

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