bit of reading..Unlike aluminum, copper, nickel, and other...

bit of reading..

Unlike aluminum, copper, nickel, and other mature metals where demand is determined mainly by economic activity in important end-use markets, future demand for magnesium alloys will be determined primarily by actions taken by magnesium producers and die casters. The work devoted to overcoming the main impediments to magnesium usage along with overall strong promotion efforts and attractive pricing will be main determinants of future consumption in structural applications.

Producers and die casters must work to lower processing costs and improve the global die casting supply base, and all interested parties, including automobile manufacturers, must work together to improve industry practices and to ensure optimal design and minimum cost of magnesium alloy parts.

In addition to addressing the current impediments to magnesium alloy usage, supply industry must find or develop "across-the-board" applications for magnesium alloys. Currently, magnesium alloys are selected on a part-by-part basis, and there is no single application that belongs to magnesium. In part, this results from the fragmented structure of automobile manufacturers, but it is also a result of the small size of the current market for magnesium alloy die castings and the lack of resources among the magnesium alloy supply industry, especially when compared to suppliers of competing materials such as aluminum or plastics.

When aluminum castings began to be used in automotive applications in the mid-1970s, they too were introduced gradually on a part-by-part basis. Today, however, aluminum Has virtually 100% of the market for parts such as pistons, transmission cases, intake manifolds, etc.

The magnesium alloy supply industry needs to emulate this behavior by selecting a part or number of parts - for example, valve covers, steering lock housing, clutch housing, instrument panels, wheels, etc. - and then develop these parts to the point where magnesium alloys are used across-the-board. Such development programs would include perfecting casting techniques, coating technology, and other production related factors as well as Finding ways to minimize costs.

Much of the literature regarding magnesium alloy usage refers to magnesium to aluminum price ratios rather than the absolute levels of magnesium alloy prices. In part, this is due to fear of US antitrust violations. The magnesium business is still a small, oligopolistic industry with only a few large sellers. Magnesium is not traded on a futures market and until large scale Soviet exports began in 1990, there were few traders active in this market. In addition, the magnesium business tends to be very secretive. Price information is not widely reported.

The suggestion that magnesium to aluminum price ratio as a measure of magnesium's competitiveness is the base of the magnesium industry is not quite logical. Firstly, magnesium competes with materials other than aluminum. Secondly, the price ratio measures raw material costs, and raw materials make up only 40-60% of the total cost of a die cast part. Focusing on changes in the raw material cost ratios overtime masks the advances made in lowering processing costs. Thirdly, aluminum prices are a moving target, but magnesium prices have been more stable. It may not be in the best interest of the magnesium alloy industry to have consumers continually evaluate the competitiveness of magnesium in terms of aluminum prices. Particularly now that secondary aluminum will be traded on the London Metal Exchange. Finally, the reliance on a price ratio assumes that the two materials have equal properties. This makes it more difficult for a potential consumer to weigh fully the properties of each material and the overall advantages and disadvantages.

Rather than focusing on the magnesium to aluminum price ratio, the industry needs to consider the substitution possibilities and the demand for magnesium alloys at different price levels. For example, if annual average alloy prices were $1.10/lb rather than $1.25/lb would demand be 30,000 mtpy 60,000 mtpy, or 90,000 mtpy, and what if prices were $0.90-1.00/lb, what effect would this have on demand?

This is a difficult question to answer, but it is a crucial question for current magnesium alloy suppliers as they set pricing policy and decide on an appropriate level of market development funding. It is also an important question for potential new suppliers as they compare their production and capital costs with the price needed to stimulate demand in the die casting sector.

There are certain indications that magnesium alloys are competitive with aluminum, steel, and plastics at prices in the $1.25-1.35 range or about current levels.

Since the mid 1970s, much emphasis has been placed on weight reduction and fuel efficiency and the role that magnesium could play in helping automakers achieve these goals. While it is certainly true that magnesium alloys offer weight savings and that in some instance car companies are willing to "pay" for weight reduction, it’s not likely that the need for weight savings, or fuel efficiency is going to drive future magnesium demand.

Intermaterial competition in the weight reduction game is fierce, and some kinds of substitution, for example, the use of aluminum rather than steel body panels, will have a far greater effect on automobile weight than the use of magnesium alloys in small parts. In addition, material substitution competes with body and engine design changes as a way of improving overall fuel efficiency.

While the magnesium industry should stand ready to take advantage of future CAFE (Corporate Average Fuel Economy) requirements or other weight reduction or fuel savings regulations, the industry must not count on this as a source of future growth. It is up to the producers to create their own future by working to remove the current impediments to alloy usage, by designing and promoting parts that take advantage of magnesium properties, including its low density, and by offering its products at a price level that supports future demand growth.

Because future demand depends heavily on actions taken by the industry, it is difficult to forecast. Discussions with producers, die casters, and automotive companies lead to a conclusion that the current interest in magnesium is real and that producers and others will continue to support development efforts and maintain attractive prices through the next years. Based on these discussions, the demand growth is was predicted to be about 12% per annum through the 1990s in die casting applications.