More bad news for future car supply is just around the corner according to news reports coming down the wires over the weekend.
If Covid-19 and a lack of micro processors to power up all those fancy electronics in our new cars wasn’t enough to slow down what has been a super buoyant car market, we now have a new contender on the horizon which has the potential to wreak complete havoc with the motor industry.
Potential Shutdown Not Months But Potentially Weeks away !
It has been reported that some of the worlds car makers are on the verge of shutting down manufacturing plants, as a worldwide shortage of magnesium (which is used in the production of aluminum) potentially comes into effect. This is being reported as being not months away but potentially just weeks. Aluminum is used widely in the manufacture of parts that go into our new cars, and it has been reported that European stockpiles could be set to run out of by the end of November.
China has a Monopoly on Magnesium Production
China essentially has a monopoly on the production of Magnesium (87% of the worldwide market), achieved by flooding local markets, driving prices down, which in turn over recent years forced some European manufacturers out of business. Ultimately this resulted in local manufacturing becoming unsustainable, and as such local manufacturers closed the doors – sadly this sounds like a remarkably familiar story!
Its all about Coal Consumption?
The Chinese Government has made global commitments with respect to CO2 Emissions targets and part of that commitment is all about coal consumption. The result of their bold 4 year coal consumption targets has seen the closure of power generators, affecting a significant number of large manufacturing plants. This has included 25 magnesium production facilities and the end result is a lack of supply into the market.
It is fair to say that the European Union is in crises as it looks to work with the Chinese to get some form of resolution to the crisis as it potentially affects entire supply chains, thousands of businesses, and millions of jobs. Magnesium prices have already sored from USD$2,000.00 to over USD$18,000 P/Mt making it almost impossible for manufacturers to source product at an affordable level.
What Does That Mean For Us Here In NZ ?
It is not all doom and gloom and that’s the good news! Firstly, it hasn’t actually happened yet – but could, so watch this space.
If I was a conspiracy theorist, which I’m not, this would make the best story in history when put alongside Covid-19… you heard it here first!
Like with all things, it’s best to be prepared though, and so for clients down here in New Zealand it means that we need to be looking right now at what needs to be replaced in 2022.
Let’s start asking questions around what options you might have when ordering vehicles in advance, or maybe holding on to existing lease vehicles, or even looking at second hand and ex-lease to get you through this next period of uncertainty and possible supply issues
The options aren’t endless but there are options. The team at Driveline are experts and have all the latest information at their fingertips . Contact the team at Driveline Here
For a more in-depth article on what this is all about click here