Economics
Feature
Magnesium for Automotive Applications:
Primary Production Cost Assessment
Sujit Das
INTRODUCTION
Magnesium has the lowest density of
the common engineering metals, and its
role in select automotive applications
is growing despite its high cost and
limited supply. Automotive applications
in which magnesium has gained a
noticeable share include cross-car
instrument panel beams, steering wheels,
and valve covers. The market for
automotive magnesium parts has grown
rapidly, nearly 15% per year during
the 1990s, and growth is expected
to continue as new applications are
developed. The average magnesium
content in the 2002 model cars was
4 kg, compared with 3.8 kg for the
previous model year.1 This increase is
mainly due to the use of magnesium
in instrument panel support beams,
driver-side instrument panel support
castings and steering wheel armatures,
cam covers, steering column jackets, and
steering column/pedal bracket supports
in sport utility vehicles such as the Ford
Explorer, Chevrolet Trailblazer, and
GMC Envoy. General Motors continues
to be the major North American automotive magnesium user, employing about
22
twice as much magnesium in its vehicles
as either Ford or DaimlerChrysler, as
shown in Figure 1. By 2004, the total
North American automotive industry
usage of magnesium is expected to
increase to about 58,000 t.2
Magnesium use in automobiles has
been mainly limited to die castings of
structural products, as the higher cost
of the metal was offset by the lower
cost of producing die-cast parts. For
magnesium wrought products, lower
process throughput in addition to the
metal’s cost cause unfavorable economics
for automotive applications. For any
large-scale commercial applications of
magnesium, the necessary high-volume
production techniques require a lower
material cost. For example, a recent
comparative analysis of automotive
magnesium covers indicates magnesium
to be the most expensive option, where
materials cost contributed 84% of the
total part cost at a production volume
of 400,000 parts/year.3 In addition, a
relatively higher percentage of waste
contributes to the high material costs
of magnesium parts. According to
the automotive industry, magnesium
becomes cost competitive with aluminum
when, in terms of raw material price,
the ratio of magnesium to aluminum is
1.9:1.4 However, it is not clear what the
market price of magnesium means in
terms of its true production cost because
of the lack of competition in the industry
and the cheap imports from outside the
Western world entering the market today.
It is therefore important to examine the
production cost of primary magnesium
in order to explore its current cost
structure and any opportunities to be more
cost-effective against other competing
materials in the automotive industry.
MAGNESIUM WEIGHT
REDUCTION AND PRICE
The price of unalloyed magnesium
ingots in 2002 was $1.20/lb compared to
$0.65/lb for unalloyed aluminum.5 On a
per-pound basis in 2002, magnesium cost
about 1.8 times more than aluminum,
whereas on a volume basis it costs only
1.2 times more. A cost comparison of
competing materials is often misleading
because of the materials’ varying density
and performance. Although the density
of magnesium is about 2/3 the density of
aluminum (1.8 gm/cm3 for magnesium
vs. 2.7 gm/cm3 for aluminum), because of
the low Young’s modulus of magnesium
it would be necessary to use more
mass to obtain the same rigidity (safety
margin to ultimate tensile strength) in
the magnesium component. Magnesium
component weight is further penalized
beyond the dimensioning with isorigidity by the minimum thickness limitations
70
60
50
Tonnes
Production technologies must be
cost effective for primary magnesium
to become an economically viable
alternative material for widespread
automotive applications. In this article,
the prices at which magnesium becomes
competitive with aluminum and steel
are examined, including magnesium
production cost estimates for current
and future scenarios using electrolytic
and thermal processes. The economic
viability of the industry for automotive
applications is also examined in the
context of magnesium market price,
taking into consideration the dynamics
of its supply and demand as well.
40
DaimlerChrysler
Ford
GM
Total
30
20
10
0
1997
1998
1999
2000
2002
2001
2003
Model Year
Figure 1. North American automotive magnesium usage.2
2004
JOM • November 2003
the other hand, the theoretical weight
reduction by magnesium substitution in
some cases may not be achievable due to
the specific part design requirements and
the existing manufacturing technology
limitations, causing a further lowering of
the material price at which magnesium
becomes competitive. The 2002 price
of unalloyed magnesium (i.e., $1.20/lb)
seems to be competitive only in the
higher price end of substitution of
aluminum components.
Table I. Characteristics of Magnesium and Competing Automotive Materials6
Material
Steel Sheet
Aluminum
Magnesium
Density
gm/cm3
Yield
Strength
kN/mm2
Ultimate
Tensile
Strength
N/mm2
% Weight
Reduction with
Design at Equal
Stiffness
2002
Material
Price
($/lb)
Estimated
Competitive
Mg price
($/lb)*
7.8
2.7
1.8
210
71
45
320
190–290**
190
62
10–41
—
$0.15
$0.65
$1.20
$0.42
$0.72–$1.10
—
* Shown in terms of magnesium substitution weight reduction potential for the given material
** Depending on diecasting or thixomolding
Full Operating Costs
($1999/lb)
of 2 mm obtainable by the existing
casting technology for large parts such
as instrument panel cross beams. The
existing cold chamber process for
mass-produced magnesium castings has
difficulty in die filling, which increases
with the distance from the gate and the
risk of creating internal stress during
solidification. Thicker walls are required
in areas of magnesium parts where
strength requirements are higher. Due
to these limitations, weight reductions
of only 30% to 50% have been obtained
compared to the theoretical 62% (as
discussed later and shown in Table 1) in
the five steel component substitutions in
Alfa Romeo 156 by Fiat Auto.6
Table I shows the percentage weight
reduction achievable when substituting
magnesium for steel sheet and aluminum
while maintaining the design at equal
stiffness and strength (i.e., isorigidity).
The table also includes major material
properties used for these estimates. A
62% weight reduction is possible only
when substituting magnesium for steel;
using magnesium instead of aluminum
allows 10–41% weight reductions,
depending on whether diecasting or
thixomolding technology is used. The
weight reductions are calculated based
on the thickness ratio of magnesium
and the original material (i.e., steel or
aluminum) using the safety margin to
the failure load criterion as follows:
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Young ’s Modulus,Mg
PRODUCTION COST
Young ’s Modulus,m
Although many processes have
been developed to produce metallic
magnesium, only three methods are now
used. The oldest of these methods, which
accounts for 70–80% of present output,
involves the electrolytic reduction of
MgCl2. The other two methods, the
Pidgeon and Magnetherm processes,
involve direct thermal reduction of
magnesium oxide at higher temperatures
either in the solid or liquid state.
Although electrolytic reduction’s efficient use of energy is attractive, the
process has two major drawbacks: the
high cost of cell feed preparation (almost
50% of total production cost) and the
low metal production rate. Electrolytic
plants’ low metal production rate requires
them to be larger—and thus have greater
capital costs—to achieve cost effectiveness, whereas cost effectiveness can be
achieved with smaller pyrometallurgical
plants. Batch mode operation at reduced
pressure and the high energy requirement for the preparation of ferrosilicon
reductant (almost 42% of the total energy
requirement) are the main reasons the
direct thermal reduction processes are
uneconomical. Site selection, primarily
based on raw material and electricity
availability, is the dominant factor in a
choice between these two processes.
Figure 2 shows the full operating
2
 UltimateTensileStrength,Mg  3
*

 UltimateTensileStrength,m 
where m stands for steel or aluminum.
These weight reduction potentials
are considerably lower than theoretical
weight reductions based on the material
density alone. The lower end value
(10%, which is based on the minimum
value of magnesium’s tensile strength)
of weight reduction potential in the
case of aluminum is too low compared
to the value obtained in automotive
applications. On average, a weight
reduction of around 30% has been
achieved when substituting magnesium
for aluminum in automotive parts (e.g.,
transmission case weight is reduced
by 30%).7 To be competitive with the
2002 price of aluminum and galvanized
steel sheet (i.e., $0.65/lb and $0.15/lb,
respectively), magnesium prices need
to be $0.72–$1.10/lb and $0.40/lb,
respectively, as shown in Table I.
However, the aluminum market has
been depressed over the past decade,
and the average unalloyed aluminum
ingot price during that period appears
to be around $0.70/lb. 5 Also, the
higher part-consolidation potential that
magnesium offers will allow magnesium
to be competitive at higher prices. On
Thermal Reduction
Electrolytic Reduction
1.19
0.99
0.83
0.83
0.73
Dead Sea
Magnesium
0.67
Magcorp
Norsk Hydro: Norsk Hydro:
Becancour
Porsgrunn
Magnola
0.93
0.97
0.95
RIMA
Northwest
Alloys
Pechiney
0.60
AMC
Timminco
Producers
Figure 2. The 1999 full operating costs of major Western primary magnesium producers.8
2003 November • JOM
23
1.60
1.40
$1.41
1.20
Figure 3. Cost components of Western
primary magnesium production.8
$1.31
Other
Labor
Energy
Capital
Materials
$ / lb
1.00
0.80
0.60
Table II. Outlook for Western World Full
Magnesium Production Plant Operating
Costs, 1999–2009 (1999 $/lb)8
Plant Type 1999
Electrolytic 0.86
Thermal
0.98
Total
0.90
2004*
2009*
0.77 (–10%) 0.70 (–19%)
1.01 (4%)
0.94 (–4%)
0.84 (–7%) 0.75 (–17%)
0.40
* Values inside parenthesis indicate % reduction in cost with
respect to 1999
0.20
0.00
Electrolytic
Reduction
Thermal
Reduction
costs by plant rated at full capacity for a
standard-type ingot product, including
all variable costs and fixed costs directly
attributable to the plant, the costs of
freight to the nearest market, and the
cost of interest on working capital.8
The full operating cost, which varies
considerably among plants, ranging from
$0.60/lb to $1.19/lb, is comparatively
lower for electrolytic than thermal
reduction plants.
Note that some of the plants (e.g.,
Norsk Hydro’s Porsgrunn plant; Noranda’s Magnola plant in Quebec; the
proposed Australian Magnesium Corporation [AMC] project in Queensland;
Alcoa’s Northwest Alloys plant in
Addy, Washington; and Pechiney’s
Marignac plant in Marignac, France)
have either been shut down completely
or mothballed over the last two years.
The two producers with the lowest costs
are electrolytic plants and have higher
annual production capacities compared
to existing plant capacities. The annual
production capacities of Magnola and
AMC are estimated to be 63,000 t and
96,000 t, compared to about 45,000 t at
the largest existing electrolytic plant.
Timminco has the highest cost due to
high-purity magnesium being produced
at that plant and has the least production
capacity of only 7,000 t/y. The cost
differences among large producers using
the electrolysis process are not great,
with an average of $0.86/lb, compared
to $0.98/lb for the thermal reduction
plants. 8 The weighted average full
operating cost of magnesium in 1999 is
estimated to be $0.90/lb.
A breakdown of 1999 production
costs for an average electrolytic and
thermal reduction plant is shown in
Figure 3. Raw material costs, principally
due to ferrosilicon, constitute the
greatest expense (i.e., 33% of total
production cost) for thermal reduction
24
producers, compared to capital cost
(i.e., 39% of total production cost) for
electrolytic reduction producers. Due to
the labor-intensive nature of the thermal
reduction process, its labor cost share
is considerably higher. The lower cost
of materials under the electrolytic
reduction is due to credits taken for
chlorine byproducts produced. On
the other hand, averaging across the
electrolytic and thermal reduction
processes, the three main operating cost
components (i.e., raw materials, labor,
and energy) had similar shares (i.e.,
about 22%) of the $0.90/lb average full
operating cost of magnesium production
facilities in the western world.8
Electrolytic plants are more capital
intensive than thermal plants, with
capital costs estimated at more than
$10,000/t and $6,000/t, respectively,
for the existing plants.8 The upcoming
greenfield electrolytic projects are
considerably higher in annual production
capacity, resulting in a lower per-unit
estimated capital investment cost of
around $8,000/t. Investment cost may
be higher in some cases due to difficulties and overruns. The capital costs
of electrolytic and thermal reduction
processes are assumed at $10,000/t and
$6,000/t of electrolytic and thermal
reduction processes, respectively, and
using a fixed charge rate of 0.12 based
on a 10% discount rate and 20 years
equipment life. The estimated capital
costs are $0.55/lb and $0.33/lb for
electrolytic and thermal reduction
processes, respectively, as also shown
in Figure 3. Using the average full
operating cost of $0.86/lb and $0.98/lb
for electrolytic and thermal reduction
plants, respectively, the corresponding
total production costs are estimated to be
$1.41/lb and $1.31/lb, respectively.
Forecasts by the CRU Group in
London for magnesium production
costs in the western world (as shown
in Table II) indicate a significant fall
between 1999 and 2009. Overall, a total
cost decline is projected to be 17%
by 2009, most of which is due to a
projected 19% decline in electrolytic
plants. Expected brownfield expansions
(e.g., Dead Sea Magnesium and Norsk
Hydro: Becancour) and greenfield
projects (e.g., Magnola and AMC) were
taken into consideration in the lower
average cost projection within this
type of producer. Although these two
greenfield projects have been mothballed
recently, it is still likely that a trend
toward larger-capacity electrolytic
plants (i.e., more than 70,000 t/y
compared to 45,000 t/y) is expected to
facilitate future lowering of magnesium
production cost. Magnesium production
cost is projected to increase only for
thermal reduction plants in 2004 due
to increasing raw materials costs. Raw
materials are a major share of total cost,
as shown in Figure 3. Using the capital
cost estimates of $0.44/lb (instead of
$0.55/lb used for 1999 due to lower
anticipated capital cost of $8,000/t
in 2009) for electrolytic plants and
$0.33/lb for thermal reduction plants, the
2009 production costs are estimated to
be $1.14/lb and $1.27/lb, respectively.
Current magnesium production costs,
estimated at $1.31–$1.41/lb, appear too
high to be competitive even with aluminum, based on the calculated competitive
magnesium price of $0.72–$1.10/lb.
However, projected production costs in
the range of $1.14–$1.27/lb improve
magnesium’s competitiveness. The price
of other substitute materials will be an
important factor, and magnesium may
be more competitive with the rebound
of the metals market. Improvements
in magnesium part-manufacturing technologies will also facilitate greater
weight reductions, thereby improving
JOM • November 2003
Price $/lb (2002 dollars)
1.80
Table III. 2002 U.S. Magnesium Market
(tonnes)16
1.60
1.40
1.20
1.00
0.80
0.60
1965
1970
1975
1980
1985
Year
1990
1995
2000
2005
Secondary Production
Exports
Imports
Consumption
Castings
Wrought Products
Aluminum Alloys
Iron and Steel Desulphurization
Other
World Production
73,600
25,400
88,000
96,100
46,362
1,940
34,900
8,510
4,351
429,000
Figure 4. The historical U.S. list prices of magnesium ingots.15
its economics. The Automotive Lightweighting Materials program of the
U.S. Department of Energy’s Office
of FreedomCAR and Vehicle Technologies is currently supporting research
for alternative cost-effective ways of
manufacturing primary magnesium. Of
the two projects supported to date, solid
oxide oxygen-ion-conducting membrane
technology for direct reduction of
magnesium from its oxide at high
temperatures has shown promising
results.9 ,10
MAGNESIUM MARKET
Unlike magnesium’s production cost,
its market price has fluctuated quite a
bit due to the dynamics of supply and
demand. During the past decade, the
U.S. list magnesium price has stayed
above $1.40/lb, with two sharp declines
as exceptions to this price, as shown in
Figure 4. Note that magnesium prices in
this figure are shown in constant terms
(i.e., 2002 dollars) while nominal prices
have been higher than the constant-dollar
prices shown. Due to fierce competition
from China—with magnesium available
at $0.57/lb11—and the weak economy,
prices have dropped during the last
two years. Numerous shutdowns have
resulted, and, since 1990, the level of
new capacity additions has only been
slightly higher than capacity loss due to
shutdowns. Anti-dumping complaints
and the imposition of duties in the United
States and the European Union have
contributed to significant disparities
between the main trading regions of
North America, Europe, and the Pacific
Rim. It appears that the supply of
magnesium from the western producers
during 2003 will be limited but with
continued strong exports of magnesium
from China and Russia. Exports from
China and Russia to the west in 2003
have been projected to be as high as
2003 November • JOM
193,000 t, more than the western world
magnesium capacity available today.13
Also, because magnesium has a small
supply base (with annual production
about 1,400 times and 45 times less
than steel and aluminum, respectively),
it is not traded on the London Metal
Exchange, so its price is more prone to
swings as demand grows and absorbs
available production. In addition, past
supply expansions in the magnesium
production capacity have not been
systematic enough to harness potential
demand for low-cost material in the
auto industry. Automakers’ demand
surpassed industry capacity, causing
wild price swings, which caused parts
manufacturers to switch from magnesium
to other competitive materials. A recent
study indicates that a slow expansion in
the supply base and prices maintained at
above $1.40/lb can lead to a more stable
demand and supply growth—in the
range of 20 lbs to 80 lbs of magnesium
per vehicle by 2015 compared to less
than 10 lbs today.13
As shown in Table III, in 2002 U.S.
magnesium production was mainly
secondary, and the U.S. production level
was less than its import level. Structural
castings (predominantly die castings)
contributed nearly 50% of total U.S.
consumption. By comparison, in 2000
as much as 53% of total magnesium was
used as a constituent of aluminumbased alloys. Magnesium usage in
aluminum-based alloys continued to
decline since 2001, when domestic
aluminum production declined.
It is anticipated that future magnesium
demand will come from the diecasting
industry for producing castings for
automobiles and light trucks in North
America and Europe (particularly in
the latter), where significant growth is
under way. The historical world rate
of growth for alloy has been 13–14%.
This rate appears to be sustainable with
continued pressure on increased fuel
economy, more automotive use, and
the partnerships formed between major
automotive manufacturers and magnesium suppliers for a secured supply of
automotive magnesium components.
These partnerships include Volkswagen
and the Dead Sea Works, Ford and AMC
(this may not be applicable anymore
due to the mothballing of AMC project
earlier in 2003), and General Motors
and Norsk-Hydro.12 As the development
of the creep-resistant alloys (e.g.,
alloys ACX, MRI 15X, and AJ by
General Motors, Dead Sea Magnesium,
and Noranda, respectively) continues,
revolutionary growth is anticipated
as magnesium finds a niche in highertemperature applications such as automatic transmissions and, perhaps,
engines. With a continued low growth in
the beverage can market and the demand
for aluminum flat-rolled products still in
its embryonic stage for the automotive
sector, magnesium growth in aluminum
alloying may not deviate significantly
from the long-term trend. On the other
hand, in terms of future production
status, the Chinese supply of low capitalintensive thermal reduction technology
magnesium will continue (limited only to
the extent of raw materials availability),
and western producers will bring little
more production capacity on line.
In the near term, the CRU Group
predicts that the market will be tight
until the new production capacity comes
on line, and imports will continue
to soften the market. The projected
average price for magnesium over the
next five year period (2005–2009) is
about $1.48/lb (in 2000 dollars), similar
to the past decade.14 The price swings
will continue, as the projected supply
may not be in line with demand. It
appears that with the current and the
25
projected magnesium price staying
above $1.40/lb, production costs of
$1.14–$1.27/lb in the long run will be
sufficiently covered. With strong growth
projected for magnesium demand and
substitutions becoming more costeffective as production costs are reduced
later this decade, significant growth in
the magnesium industry can be expected
as long as western producers—who
have had very little return on their last
decade’s investment—are not impacted
severely by below-cost magnesium
imports.
CONCLUSION
Based on magnesium production cost
projections and the existing depressed
aluminum prices, magnesium will be
competitive with aluminum only when
the maximum weight reduction potential
(i.e., about 40%) is possible in niche
automotive applications. A further reduction in primary magnesium production
cost may be necessary if aluminum
prices do not recover in the future and
for applications where this high rate of
weight reduction may not be attainable
due to part design and/or manufacturing
technology limitations.
The economic viability of magnesium
in automotive applications remains unanswered without an examination of economics of fabricated magnesium parts,
particularly for magnesium wrought
products where the operating temperature
is higher than steel. A widespread
substitution of magnesium in automotive
applications will not only be determined
by magnesium’s production cost, but
by the economics of other competing
materials and other considerations such
as system and life cycle estimates that
will dictate its overall economic viability
in the marketplace.
References
1. D.A. Kramer, U.S. Geological Survey Minerals
Yearbook–2002 (Washington, D.C.: USGA, 2000). Also
available at minerals.er.usgs.gov/minerals/.
2. L. Riopelle, personal communication, Hydro
Magnesium, Livonia, MI (8 November 2002).
3. K. Johnson, Advanced Materials & Processes,
(2002), pp. 62–65.
4. F.H. Froes, JOM, 50 (11) (1998), p. 54.
5. United States Geological Survey, Mineral Commodity
Summaries–2003 (Washington, D.C.: USGA, 2003).
Also available at minerals.er.usgs.gov/minerals/.
6. R. Porro, SAE Paper No. 980084 (Warrendale,
PA: SAE, 1998).
7. P. Reppe et al., SAE Paper No. 980470 (Warrendale,
PA: SAE, 1998).
8. The Ten Year Outlook for Magnesium, CRU Ref
No:2498/8 (London: CRU International Ltd. (CRU),
2000).
9. U.S. Department of Energy (DOE), FY 2001: Progress
Report for Automotive Lightweighting Materials
(Washington, D.C.: Office of Advanced Automotive
Technologies, 2002).
10. U. Pal et al., (Paper presented to U.S. DOE,
Department of Manufacturing Engineering, Boston
University, MA, September 2002).
11. H.I. Kaplan, Magnesium Supply and Demand
2001 (Washington, D.C.: International Magnesium
Association, 2002).
12. R.L. Edgar, The Magnesium Industry—Past,
Present and Future (Washington, D.C.: International
Magnesium Association, 2003).
13. R.J. Urbance et al., JOM, 54 (8) (2002), pp.
25–33.
14. The Ten Year Outlook for Magnesium, CRU Ref
No. 2602 (London: CRU International Ltd. (CRU),
2000).
15. Metal Statistics 2002 (New York: American Metal
Market, 2002).
16. D.A. Kramer, U.S. Geological Survey Minerals
Yearbook—2003 (Washington, D.C.: USGA, 2003). Also
available at minerals.er.usgs.gov/minerals/.
Sujit Das is with Oak Ridge National Laboratory.
For more information, contact Sujit Das, Oak
Ridge National Laboratory, Engineering Science
and Technology Division, P.O. Box 2008, Building
3156, 1 Bethel Valley Road, Oak Ridge, Tennessee
37831-6073; (865) 574-5182; fax (865) 574-3851;
e-mail [email protected].
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