Next magnesium squeeze: Demand climbs amid supply scramble

• Global magnesium demand forecast to rise from 1.07Mt in 2025 to 1.67Mt by 2032.
• China produces around 90% of primary magnesium, while the US currently produces none.
• Defence, vehicle lightweighting and supply security increasing magnesium’s strategic importance.

Special Report: Magnesium is heading towards an unusual supply challenge – global demand is forecast to climb by more than 50% over the next seven years, yet almost nine out of every 10 tonnes of primary metal are produced in China.

Global consumption is forecast to rise from around 1.07Mt in 2025 to 1.67Mt by 2032, according to CM Group data cited in Latrobe Magnesium (ASX:LMG) latest investor presentation.

That represents compound annual growth of around 6.6% for a market where primary production outside China remains scarce.

The concentration is attracting increasing attention from governments. Magnesium is included in critical minerals frameworks across major industrial economies including the US, European Union, Australia and Japan, while Canada includes it within its broader critical minerals strategy.

Magnesium is increasingly being considered through the lens of supply security and geopolitical risk as well as price and industrial performance.

A lot more than mag wheels

Magnesium is the lightest commonly used structural metal and combines low density with high strength-to-weight ratio. Applications run through automotive components, aluminium alloys, steelmaking, titanium production, aerospace and defence.

Latrobe’s market data puts die casting at 43% of global magnesium consumption in 2025, followed by alloying at 24%, titanium reduction and steel desulphurisation at 13% each, and other applications at 6%.

Electric vehicles provide another potential demand driver. Large battery packs add substantial weight, increasing the incentive for manufacturers to make other parts of the vehicle lighter. Magnesium can be used in lightweight components and aluminium alloys, helping manufacturers reduce vehicle weight.

Latrobe’s presentation points to increasing magnesium use by Chinese EV manufacturers and the potential for North American and European manufacturers to move towards similar magnesium intensity over time.

Defence adds another dimension. Magnesium feeds into supply chains for aircraft, missiles, drones and other military equipment, as well as the aluminium and titanium industries that supply them.

US Congresswoman Elise Stefanik recently used a Wall Street Journal opinion piece, ‘Make American Magnesium Again’, to highlight America’s magnesium dependence, pointing to applications stretching from aircraft and missiles to ships, satellites and automobiles.

America makes none of it

That dependence is particularly stark in the US. America has no primary magnesium production after its last producer ceased output earlier this decade following equipment failures. The operator subsequently entered bankruptcy protection.

The US is now more than 75% reliant on imports for its primary magnesium requirements, according to USGS data.

China, meanwhile, produces around 90% of the world’s primary magnesium, with Russia contributing another roughly 6%, according to LMG’s presentation.

LMG CEO Rob Stein says the concentration was surpassed by only one other critical mineral, gallium, in terms of China’s dominance of global supply.

USGS data supports the comparison: for 2023 it estimated China accounted for 98% of global primary gallium production and 89% of magnesium metal production.

That leaves very little primary magnesium production coming from the rest of the world.

The risks of that concentration became apparent in 2021 when energy restrictions curtailed production at Chinese magnesium smelters and prices surged. Stefanik said magnesium prices increased fivefold during the disruption.

The episode demonstrated how quickly problems in one producing country could flow through a market supplying manufacturers around the world.

Governments want supply closer to home

Western governments are responding. The US, EU, Australia and Japan explicitly classify magnesium as a critical mineral, while other industrial economies include it within broader critical minerals strategies.

The US also maintains anti-dumping duties on Chinese magnesium products, with rates varying by product and producer. Latrobe’s market analysis says US magnesium prices command a premium to Chinese prices as a result of import costs, anti-dumping duties, tariffs and security-of-supply considerations.

Europe has put numerical targets around its diversification push. Under the EU’s Critical Raw Materials Act, the bloc is targeting 10% of annual strategic raw-material consumption from European extraction, 40% from European processing and 25% from recycling. It also seeks to ensure no more than 65% of annual consumption at the relevant processing stage comes from any single third country.

Against China’s roughly 90% share of primary magnesium production, the scale of the diversification task is obvious.

Environmental performance is also becoming more important as manufacturers scrutinise embedded emissions and Scope 3 emissions across their supply chains. The result is a market where security of supply, country of origin and carbon intensity could increasingly sit alongside price and quality in purchasing decisions.

Where Latrobe fits

That changing market provides the backdrop to Latrobe Magnesium’s plans.

LMG has developed a patented process to recover magnesium from industrial by-products. Its Demonstration Plant in Victoria’s Latrobe Valley uses brown coal fly ash and has demonstrated sustained production of magnesium oxide. The next major technical milestone is magnesium metal.

LMG has also prioritised a proposed 50,000tpa primary magnesium plant in South Carolina, with potential expansion to 100,000tpa.

A 50,000tpa operation would represent only around 3% of the 1.67Mt of global demand forecast for 2032, but it would be producing inside a country that currently has no primary magnesium production.

The commercial interest is already substantial. LMG has non-binding letters of intent covering 32,000tpa from US customers, equivalent to almost two-thirds of the proposed initial plant capacity.

The company has also received a US$15m non-binding Letter of Support from a large US financial institution towards equity funding for the project’s feasibility study. The proposed investment remains subject to conditions including securing a further US$15m from a specified US-based entity, due diligence, approvals and definitive agreements.

LMG is also advancing its Victorian Demonstration Plant towards first magnesium metal, providing a nearer-term technical milestone for the process underpinning its larger commercial ambitions.

The 600,000-tonne question

The market arithmetic tells the story. If CM Group’s forecast proves accurate, the magnesium industry will need to supply roughly 600,000 additional tonnes a year by 2032 compared with 2025.

China is likely to remain the world’s dominant producer. The question for Western economies is how much of that growing requirement they are prepared to continue sourcing from a market where production is already overwhelmingly concentrated in one country.

Critical-minerals policies, trade measures and government funding are increasingly aimed at diversifying that supply.

For LMG, the opportunity is to turn that strategic need into tonnes of magnesium produced outside the existing supply chain.

This article was developed in collaboration with Latrobe Magnesium, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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