22 JOM • November 2003

Feature

Magnesium for Automotive Applications: Primary Production Cost Assessment Sujit Das

Economics

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.

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 automo-tive magnesium user, employing about

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 isorigid-ity by the minimum thickness limitations

Figure 1. North American automotive magnesium usage.2

1997 20011999Model Year

Tonn

es

2004

70

20000

10

20

30

40

50

60

20021998 2003

DaimlerChryslerFordGMTotal

232003 November • JOM

Table I. Characteristics of Magnesium and Competing Automotive Materials6

Ultimate % Weight 2002 Estimated Yield Tensile Reduction with Material Competitive Density Strength Strength Design at Equal Price Mg priceMaterial gm/cm3 kN/mm2 N/mm2 Stiffness ($/lb) ($/lb)*

Steel Sheet 7.8 210 320 62 $0.15 $0.42Aluminum 2.7 71 190–290** 10–41 $0.65 $0.72–$1.10Magnesium 1.8 45 190 — $1.20 —

* Shown in terms of magnesium substitution weight reduction potential for the given material** Depending on diecasting or thixomolding

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 diffi culty in die fi lling, which increases with the distance from the gate and the risk of creating internal stress during solidifi cation. 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 fi ve 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:

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

the other hand, the theoretical weight reduction by magnesium substitution in some cases may not be achievable due to the specifi c 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.

PRODUCTION COST

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 effi -cient 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 effective-ness, whereas cost effectiveness can be achieved with smaller pyrometallurgical plants. Batch mode operation at reduced pressure and the high energy require-ment 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

Figure 2. The 1999 full operating costs of major Western primary magnesium producers.8

Dead SeaMagnesium

MagnolaNorsk Hydro:Becancour

Producers

1.40

Norsk Hydro:Porsgrunn

0.000.200.400.600.801.001.20

AMCMagcorp RIMA TimmincoPechineyNorthwestAlloys

Full

Ope

ratin

g C

osts

($19

99/lb

)

0.73 0.670.83 0.83

0.60

0.99 0.93

1.19

0.950.97

Electrolytic Reduction Thermal Reduction

Young s Modulus

Young s Modulus

UltimateTensileStrength

Mg

m

’ ,

’ ,

*,MMg

mUltimateTensileStrength,

23

24 JOM • November 2003

Table II. Outlook for Western World Full Magnesium Production Plant Operating

Costs, 1999–2009 (1999 $/lb)8

Plant Type 1999 2004* 2009*

Electrolytic 0.86 0.77 (–10%) 0.70 (–19%)Thermal 0.98 1.01 (4%) 0.94 (–4%)Total 0.90 0.84 (–7%) 0.75 (–17%)

* Values inside parenthesis indicate % reduction in cost with respect to 1999

costs by plant rated at full capacity for a standard-type ingot product, including all variable costs and fi xed 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; Noran-da’s Magnola plant in Quebec; the proposed Australian Magnesium Cor-poration [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

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 diffi cul-ties 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 fi xed 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 signifi cant 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 brownfi eld 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 greenfi eld 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 alumi-num, 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 tech-nologies will also facilitate greater weight reductions, thereby improving

Figure 3. Cost components of Western primary magnesium production.8

Electrolytic Reduction

1.60

0.20

0.40

0.60

0.80

1.00

1.20

1.40$

/ lb

0.00

OtherLaborEnergyCapitalMaterials

ThermalReduction

$1.41$1.31

252003 November • JOM

Table III. 2002 U.S. Magnesium Market (tonnes)16

Secondary Production 73,600Exports 25,400Imports 88,000Consumption 96,100 Castings 46,362 Wrought Products 1,940 Aluminum Alloys 34,900 Iron and Steel Desulphurization 8,510 Other 4,351World Production 429,000

its economics. The Automotive Light-weighting Materials program of the U.S. Department of Energy’s Offi ce of FreedomCAR and Vehicle Technolo-gies 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 fl uctuated 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 fi gure are shown in constant terms (i.e., 2002 dollars) while nominal prices have been higher than the constant-dollar prices shown. Due to fi erce 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 signifi cant disparities between the main trading regions of North America, Europe, and the Pacifi c 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

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 aluminum-based 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 signifi cant 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 magne-sium 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 fi nds a niche in higher-temperature applications such as auto-matic transmissions and, perhaps, engines. With a continued low growth in the beverage can market and the demand for aluminum fl at-rolled products still in its embryonic stage for the automotive sector, magnesium growth in aluminum alloying may not deviate signifi cantly from the long-term trend. On the other hand, in terms of future production status, the Chinese supply of low capital-intensive 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 fi ve 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

Figure 4. The historical U.S. list prices of magnesium ingots.15

1965 19851975Year

2000

1.80

19800.60

0.80

1.00

1.20

1.40

1.60

19901970 1995 2005

Pric

e $/

lb (2

002

dolla

rs)

26 JOM • November 2003

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projected magnesium price staying above $1.40/lb, production costs of $1.14–$1.27/lb in the long run will be suffi ciently covered. With strong growth projected for magnesium demand and substitutions becoming more cost-effective as production costs are reduced later this decade, signifi cant 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 reduc-tion 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 unan-swered without an examination of eco-nomics 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.: Offi ce 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 Labora-tory.

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 dass@ornl.gov.