UNITED STATES DEPARTMENT OF COMMERCE BUREAU OF INDUSTRY AND SECURITY

Washington, D.C.

IN THE MATTER OF

SECTION 232 NATIONAL SECURITY INVESTIGATION OF IMPORTS OF ALUMINUM

)))))))))))

NON-CONFIDENTIAL

WRITTEN COMMENTS OF US MAGNESIUM LLC

Jennifer Lutz ECONOMIC CONSULTING SERVICES, LLC 2001 L Street, NW, Ste. 1000 Washington, D.C. 20036 (202) 466-7720 Economic Consultant for US Magnesium LLC

Stephen A. JonesBenjamin J. Bay KING & SPALDING LLP 1700 Pennsylvania Avenue, NW Washington, D.C. 20006-4706 (202) 737-0500 Counsel for US Magnesium LLC

June 23, 2017

I. INTRODUCTION

On April 26, 2017, the Secretary of Commerce initiated an investigation under Section 232 of

the Trade Expansion Act of 1962, as amended, 1 for the Department of Commerce ("Commerce") to

determine the effects on the national security of imports of aluminum. On May 9, 2017, Commerce

published a Federal Register notice stating that it would conduct a public hearing on June 22, 2017,

and that written comments should be filed by June 29, 2017.2 Pursuant to Commerce's notice, US

Magnesium LLC ("US Magnesium") submits the following comments.

II. EXECUTIVE SUMMARY

US Magnesium is headquartered in Salt Lake City, UT, and has its production facility on

the western shore of the Great Salt Lake in Rowley, UT. The only remaining U.S. producer of

commercial quantities of primary magnesium, US Magnesium directly employs about 440

people and indirectly employs hundreds more. As such, it is the largest and most important

supplier of magnesium to U.S. companies producing aluminum alloys. Virtually all aluminum

alloys contain magnesium, which provides critical hardening properties to aluminum alloys. All

of these alloys are important for the aluminum industry and therefore critical to the health of the

national economy. Because almost all aluminum alloys require magnesium, and because the

domestic manufacture of products made from aluminum alloys is critical to U.S. national

security, the domestic production of magnesium is also critical to U.S. national security.

I 19 U.S.C. § 1862.

2 Bureau of Industry and Security, Notice of Request for Public Comments and Public Hearing on Section 232 National Security Investigation of Imports of Aluminum, 82 Fed. Reg. 21509 (May 9, 2017). A second notice was subsequently issued changing the deadline for the submission of written comments to June 23, 2017. Bureau of Industry and Security, Change in Comment Deadline for Section 232 National Security Investigation of Imports of Aluminum, 82 Fed. Reg. 25597 (June 2, 2017).

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In addition, magnesium is required for the production of other military-critical products,

such as steel, nodular iron, titanium, beryllium, and zirconium. Magnesium is also used directly

as a component in illumination and countermeasure flares, heater packets, and aerospace castings

for the military. Domestic production of magnesium is therefore critical to the ability of

Department of Defense ("DOD") to source the material needed for these products.

Magnesium is an import-sensitive material, and US Magnesium and its predecessor,

Magnesium Corporation of America, have been combating dumped and subsidized imports of

pure, alloy, and granular magnesium for many years. The Department of Commerce imposed

antidumping duty orders on imports of magnesium from China in 1995, 2001, and 2005. Those

orders, however, have not eliminated the adverse impact of China on US Magnesium or the

global magnesium market. Massive overcapacity in China has depressed markets worldwide,

diverting magnesium to the relatively higher prices available in the United States. China

produces over 85 percent of global magnesium requirements and has the capacity to supply more

than 100 percent of global demand. With capacity utilization rates under 60%, Chinese excess

capacity, overproduction, and pricing practices have destroyed the formerly vibrant magnesium

industries of Canada, Japan, and Europe, which no longer exist. Now, the U.S. industry is in

danger. Twenty years ago, there were three domestic primary magnesium producers with

nameplate capacity of 168,000 MT. Today, only US Magnesium remains. In 2006, Canada had

123,000 MT of primary magnesium capacity. Today, it has none. New capacity continues to be

installed in China, with a massive new production facility in Qinghai province coming on line

just this year. That facility has been commissioned to produce 100,000 tons per year, which

constitutes, by itself, almost enough capacity to supply the entire U.S. market.

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US Magnesium is adversely affected by imports of pure, alloy, and granular magnesium

from Israel, Russia, and Turkey, among other countries. Imports from Russia and Turkey have

increased significantly in recent months. In addition, other product forms, such as secondary

alloy magnesium, magnesium scrap, and magnesium reagents for steel production are entering

the United States in increasing volumes from many countries and taking market share from US

Magnesium. These additional volumes have resulted in price declines that are harming US

Magnesium's financial condition, employment, and ability to invest in capacity to supply the

U.S. market. While US Magnesium has recently invested [ ] in the

equipment needed to expand its capacity, it has not been able to utilize this capacity due to

adverse market conditions. The company cannot continue to invest in maintaining or adding

additional capacity to supply the aluminum industry without assurance that it will be able to

operate profitably in the United States. In fact, without a significant improvement in conditions,

it [ ] produce magnesium in the United States.

US Magnesium believes that the health of the domestic aluminum industry is critical to

national security, and as such, the industry should be granted relief Likewise, US Magnesium

believes that the domestic magnesium industry is critical to national security. Accordingly, US

Magnesium requests that the Department of Commerce determine that imports of magnesium

threaten to impair the national security of the United States and impose trade relief to ensure that

the U.S. magnesium industry can survive and grow.

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Ill. BACKGROUND

A. Overview of Magnesium Production in the United States

The magnesium industry has been important to the national security of the United States

since its inception. 3 The first magnesium plants were built in the United States during World

War I by General Electric, Dow Chemical, American Magnesium Company, and others.

Demand declined after the war, and by the late 1920s, only Dow continued production. That

changed when the United Stated entered World War II. Dow continued production, but the

Federal government established thirteen new magnesium plants to meet the military's need. By

the end of World War II, U.S. production capacity was 291,000 tons per year. Much of that

capacity was taken off line after World War II, but production was again revived during the

Korean War. After the Korean War, Dow operated its plant in Freeport, Texas and a

government-owned plant in Velasco, Texas at full capacity to build a government stockpile-

highlighting the strategic importance of magnesium to the military. This stockpile was gradually

depleted and eventually terminated in 1975, making the United States completely reliant on the

domestic magnesium industry to meet any increased demand in times of military action or

national emergency.

Dow's business focus shifted in the early 1970's, and it eventually closed the Velasco

plant and operated only the Freeport plant. Alcoa entered the magnesium industry in the early

1970's, opening Northwest Alloys in Addy, Washington in 1976. National Lead Industries

operated a plant on the shore of the Great Salt Lake and commenced magnesium production

there in 1972. In 1980, AMAX, Inc. acquired the National Lead Industries plant, brought the

3 This discussion is based on an article written by Marvin B. Lieberman, a Professor of Policy at UCLA's Anderson School of Management, dated August 17, 2000, entitled "The Magnesium Industry in Transition." The article was obtained from Dr. Anderson's web site at http://www.anderson.ucla.edu/faculty/marvin.lieberman/publications/MagnesiumlndustryTransit ion2001.PDF. A copy of the article is included as Exhibit 1.

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plant to design capacity, and sold it to Magnesium Corporation of America ("Magcorp") in 1989.

In the early 1990's, imports began to flood into the market, first from Canada, then from Russia

and China. Although antidumping duty orders and countervailing duty orders were imposed on

imports from Canada in 1992 and on imports from China in 1995, the severe price pressures in

the market caused Dow to close the Freeport plant in 1998 (after rising water from a hurricane

damaged the plant) and Alcoa to close Northwest Alloys in 2001. In 2001, Magcorp filed for

bankruptcy protection, and its assets were purchased out of bankruptcy in 2002 by US

Magnesium. Since that time, US Magnesium has been the only U.S. producer of commercial

quantities of primary magnesium.

B. Overview of US Magnesium

US Magnesium harvests brines from the Great Salt Lake to produce magnesium. US

Magnesium directly employs 440 people, and indirectly employs hundreds more, such as

contractors and service providers in Tooele County, Utah. United Steelworkers Union Local

8319 represents workers at US Magnesium's plant, and the union supports US Magnesium's

efforts in this Section 232 investigation.

US Magnesium produces pure magnesium (containing at least 99.8 percent by weight of

magnesium), alloy magnesium (containing less than 99 .8 percent by weight of magnesium), and

magnesium granules, as well as recovering and selling a variety of byproduct chemicals. 4

C. U.S. Magnesium Production is Critical to National Security

As noted above, US Magnesium is the last remaining producer of primary magnesium in

the United States. Twenty years ago, there were three U.S. producers.5 Today, only US

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4 http://usmagnesium.com/products/; http ://usmagnesium.com/products/ chemicals/.

5 https://minerals.usgs.gov/minerals/pubs/commodity/magnesium/400498.pdf.

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Magnesium remains, and while it has invested significantly to increase its production capacity by

two-thirds in the past ten years, domestic capacity remains less than half of what it was 20 years

ago.

The Defense Logistics Agency ("DLA") lists magnesium as a strategic material,6 and US

Magnesium frequently has military visitors to its plant to review its operations. For example, in

October 2016 and April 2017, groups from the [

] visited US Magnesium. During these visits, they discussed the importance of

magnesium to the national economy and to national security. 7 As another example, in May

2016, representatives of [ ] visited the plant. In a letter thanking

US Magnesium for its hospitality, [ ] noted that the magnesium provided by

US Magnesium for countermeasure flares is a "critical material. "8 Magnesium is used in the

production of a number of products that are critical to national security.

1. Aluminum

With respect to aluminum, the direct subject of this investigation, magnesium is essential

to the production of aluminum alloys. Aluminum is identified by the DLA as a strategic

material.9 Virtually all aluminum alloys contain magnesium, which provides hardening

properties to the alloys. Because almost all aluminum alloys contain magnesium, and because

the domestic manufacture of products made from aluminum alloys is critical to U.S. national

security, the domestic production of magnesium is also essential to U.S. national security.

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6 http://www.dla.mil/HQ/ Acquisition/StrategicMaterials/Materials.aspx

7 See Exhibit 2.

8 See Exhibit 3.

9 Id.

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The U.S. aluminum industry consumes approximately [ ] ST of magnesium per

year. US Magnesium supplies approximately [ ] percent of that consumption. Over recent

years, the prices at which it sells to the aluminum sector [

] percent from 2012 to 2016 due to low-priced import competition.

2. Steel

Magnesium is also essential to the production of steel. Desulfurization reagents

containing magnesium are used to remove sulfur. Sulfur is an undesired element in most steel

applications (a result of the use of coke in blast furnace smelting), because it impedes welding

and forming and can cause the steel to be brittle. To remove sulfur from steel during the

steelmaking process, a desulfurizing reagent - primarily made of magnesium, lime, and/or

calcium carbide, either alone or in a blend - is injected into the hot metal through a lance. Once

the reagent is injected, the sulfur-containing compounds found in the iron transfer to slag, which

is then discarded. US Magnesium [ ], as it

was first [ ] by imports of granular magnesium from China, and then, following the

imposition of anti dumping duties on such imports from China, by imports of magnesium

reagents. US Magnesium (then operating as Magnesium Corporation of America, or Magcorp)

supplied almost [ ] ST of magnesium to the U.S. market [ ] for

the desulfurization market in 1998. That volume fell to just over [ ] ST in 1999, as

desulfurization reagent producers shifted purchases to granular magnesium from China. By

2000, [ ] . In 2001, Magcorp obtained trade relief against

imports of granular magnesium from China. Magcorp, and subsequently US Magnesium,

[

], because those products were not covered by the order. Today,

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US Magnesium estimates that approximately [ ] ST of magnesium is contained in the

desulfurization reagents consumed by the domestic steel industry each year. 10

3. Military Flares

Magnesium is used in other military applications. Among specific DOD uses, it is used

in the production of illumination and countermeasure flares for the U.S. military. The volume of

magnesium consumed in these applications varies from year to year, and totaled [ ] in

2016. US Magnesium has supplied [ ] of the volume for these applications in

recent years.

4. Heater Packets for Military Food Rations

Magnesium is used in heater packets for military food rations. US Magnesium has

[

]

5. Gravity Castings

Alloy magnesium is used in the production of gravity castings for the aerospace industry,

such as gearboxes, transmission housings, andjet engine components. US Magnesium estimates

that [ ]

of magnesium used for DOD castings in 2016. US Magnesium competes with import sources for

this business, and in 2016, supplied [ ] of the market.

6. Magnesium Sheet and Plate

The DOD also consumes magnesium sheet and plate in various applications, including

test fixtures, batteries, and electronics enclosures. US Magnesium estimates that this use

10 Imports of magnesium desulfurization reagents enter under HTS 3824.99.9295. This is a basket category, so the exact volume of imports is not known. US Magnesium has requested a breakout in the tariff schedule for this product.

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accounts for [ ] per year. In recent years, this business was supplied by imports from

[

]

7. Titanium

Magnesium is also used in the production of certain metals, including titanium,

beryllium, and zirconium, all of which have significant military applications. Magnesium is used

in the production of titanium, with one pound of magnesium required for each pound of titanium

produced. Titanium is identified by the DLA as a strategic material, 11 and is used in the

production of components for fixed and rotating wing aircraft, and vehicles such as tanks. US

Magnesium has supplied [ ] of the magnesium purchased to produce titanium

sponge in the United States. That volume, however, has fallen sharply with the closure in 2016

of ATI's plant in Rowley, UT, right next to US Magnesium's production facility. When ATI

closed the facility, its press release indicated that the closing was due to adverse market

conditions. 12

8. Beryllium

Beryllium is identified by the DLA as a strategic material, 13 and is used in military-

related applications such as electrical components, optical systems, and tank mirrors. Each

pound of beryllium produced requires almost 3 pounds of magnesium. US Magnesium estimates

that U.S. beryllium production consumed [

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11 http://www.dla.mil/HQ/ Acquisition/StrategicMaterials/Materials.aspx

12 http://ir.atimetals.com/news-and-events/press-releases/2016/08-24-2016-122218784

13 Id.

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] of that volume supplied by US Magnesium. While US Magnesium has [

] with import sources.

9. Zirconium

Zirconium is identified by the DLA as a strategic material, 14 and is used in nuclear

reactors andjet engine components. Over one-half pound of magnesium is used to produce each

pound of zirconium. The volume of magnesium used in this application has declined over recent

years, totaling approximately [ ] in 2016. US Magnesium [

]

D. Imports Pose a Significant Threat to Continued U.S. Magnesium Production

1. Magnesium is an Import Sensitive Material

US Magnesium, and its predecessor, Magcorp, have been combating dumped and

subsidized imports of pure, alloy, and granular magnesium for many years. In such

investigations, the U.S. International Trade Commission ("ITC") has made a series of findings

with respect to the "conditions of competition" that affect the domestic market for magnesium.

In its investigations, the ITC has found that "{t}he market for pure and alloy magnesium {is}

price competitive," with differences other than price reported to be insignificant. 15 In more

recent investigations, the ITC has continued to find magnesium to be "a fungible, commodity

product, for which price is an important factor in purchasing decisions." 16 The ITC has further

found that demand for magnesium is derived from the demand for applications in which

14 Id.

15 Pure and Alloy Magnesium from Canada and Pure Magnesium from China, US ITC Pub. 3859 (July 2006) ("Pub. 3859") at 27-28.

16 Magnesium from China and Russia, Inv. Nos. 731-TA-1071 and 1072 (Final), USITC Pub. 3763 (Apr. 2005) ("Final Reporf') at 16.

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magnesium is used. 17 These applications include aluminum production, die-casting, and iron and

steel desulfurization. Demand in these applications "generally tracks overall economic

activity." 18

The ITC has noted frequently in its discussion of the conditions of competition that

primary electrolytic producers of magnesium, such as US Magnesium:

Have a strong incentive to maintain a continuous level of production because the electrolytic cells used to make primary magnesium must be kept in constant operation to avoid their deterioration and significant rebuilding costs. Therefore, when faced with price competition, primary magnesium ?roducers will tend to cut prices to maintain production volume. 1

Demand for magnesium is price inelastic, meaning that lower prices for magnesium do not cause

increased consumption. Thus, primary magnesium producers are extremely sensitive to price

competition.

2. Imports of Magnesium Have Historically Threatened and Continue to Threaten Magnesium Production in the United States (and in Other Countries)

Imports of magnesium pose a significant threat to the domestic industry. Twenty years

ago, the domestic industry consisted of three producers, US Magnesium (then Magcorp},

Northwest Alloys (a captive producer for Alcoa Aluminum), and Dow Magnesium. Dow

Magnesium closed its Freeport, Texas plant in 1998. It suffered damage to the plant in a

hurricane, and market conditions, caused largely by low-priced imports, were so poor that Dow

decided not to return the plant to operation. Northwest Alloys closed in 2001, with the owners

citing the high production costs relative to other sources. In fact, Alcoa closed the plant because

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11 Id.

18 Id.

19 Id. at 17, footnote omitted.

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it was able to purchase imports of magnesium at significantly lower prices. As U.S. production

capacity was being closed, the Chinese industry expanded capacity on a massive scale. U.S.

capacity exceeded Chinese capacity through 1998, until China's capacity started to increase

significantly, causing U.S. production to shut down.20

Similarly, there were three primary magnesium producers in Canada, all of which have

ceased production. One Canadian producer, Magnola Metallurgy, started production in 2001 at a

plant that was designed eventually to reach 58,000 MT of capacity, but it was temporarily idled

in 2003, before the construction of its production equipment was complete. Magnola's press

release regarding its closure stated" ... {W}e are facing reality head-on and adjusting to the

developments that have occurred in the marketplace, including increased production from

China."21 Another Canadian producer, Norsk Hydro Canada Inc. (''NHCI") announced in

October 2006, that it would close its facility. 22 The company stated:

It is primarily the extensive export of very low-priced metal from China that is preventing continued production at the world's largest and most environmentally friendly magnesium plant."23

A third Canadian producer, Timminco, scaled back its production starting in 2006.24

Press reports note that Timminco "found that it could import magnesium from China {into

20 See Exhibit 4.

21 News Release, ''Noranda to Shutter Quebec Magnesium Plant," American Metal Market March 25, 2003 (emphasis added), attached in Exhibit 5.

22 See "Norsk Hydro to close Quebec magnesium plant," American Metal Market (October 31, 2006) in Exhibit 6.

23 Id.

24 See Timminco magnesium workers sign labor deal, American Metal Market (June 5, 2007) in Exhibit 7.

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Canada} at a lower cost than running the Haley operation."25 The most recent (2015) USGS

Minerals Yearbook reports no Canadian production of primary magnesium. 26

In fact, the global magnesium market continues to be highly distorted by the Chinese

industry. The Chinese magnesium ind~stry is by far the largest in the world. While global

production (used as a proxy for consumption) was reported to be 972,000 MT in 2015, global

capacity was reported to be 1.9 million MT, with China accounting for 1.6 million MT of that

capacity.27 Regular trade remedies against China, such as antidumping duty orders, are not

sufficient to protect domestic industries. For example, the EU instituted an antidumping duty

order against imports of pure magnesium from China in April 1999. Despite this measure,

French producer Pechiney closed its 17,000 MT primary magnesium production facility in

Marignac, France in June 2001 due to competition with cheaper imports,28 although it continued

to perform some recycling. In 2002, Norsk Hydro Norway closed its 42,000 MT plant in

Porsgrunn, Norway, blaming low-priced exports from China.29 Indian producer Southern

Magnesium and Chemical, which had obtained an anti dumping duty order on imports of pure

magnesium from China, eventually ceased production and instead became an importer of low-

25 Id.

26 See Exhibit 8.

21 Id.

28 "Pechiney's Magnesium Plant to Stay Shut," American Metal Market (October 16, 2001 ), in Exhibit 9. Although Pechiney ceased production of primary magnesium in 2001, it maintained all of the equipment necessary to re-melt magnesium and alloy magnesium scrap in order to produce secondary magnesium.

29 "Porsgrunn Magnesium to End," American Metal Market (October 14, 2001), in Exhibit 10.

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priced magnesium from China.30 Through the Chinese industry's expansions and the closure of

capacity in other countries, including the United States, China's share of total global magnesium

production capacity has increased from 5.2 percent in 1998 and 1999 to over 84 percent in 2014

and 2015.31

IV. CONSIDERATION OF THE REGULATORY FACTORS STRONGLY SUPPORTS A DETERMINATION THAT IMPORTS THREATEN TO IMPAIR THE NATIONAL SECURITY OF THE UNITED STATES

A. The Quantity and Makeup of Imports of Magnesium Are Harming the Domestic Industry, Strongly Supporting an Affirmative Determination

The damaging effects of imports are particularly clear with respect to the magnesium

industry. As detailed above, numerous producers, both in the United States and in other

countries, have been forced to cease production because of the severe imbalances caused by the

massive overcapacity in China. The distortions in the market make US Magnesium highly

vulnerable to import competition. If US Magnesium is forced to shut down due to the poor

market conditions caused by imports, national security interests will be harmed. Third-country

suppliers unable to compete against the onslaught of Chinese production would also likely close

over time, as they have over the past decades, leaving the United States and other markets reliant

on magnesium from a single country source: China.

While overall import volumes of traditional forms of magnesium have not increased

significantly, the non-traditional forms have made significant gains in acceptance among

magnesium consumers. 32 Inexpensive substitutes for primary pure and alloy magnesium, namely

30 Annual Report 2002-2003, Directorate General of Anti-Dumping and Allied Duties.

31 See Exhibit 4.

32 See Exhibit 11. Combined imports of magnesium under the HTS numbers for pure magnesium, alloy magnesium, magnesium waste and scrap, and granular magnesium have not increased overall in volume from 2014 through Ql 2017.

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magnesium waste and scrap and secondary alloy magnesium, are being imported in increased

quantities and used in various applications, driving down primary magnesium prices. The price

differential is quite notable, as shown below.

TABLE 1: U.S. Import Average Unit Values (" AUV") for Primary Pure and Alloy Magnesium and Secondary Alloy Magnesium and Magnesium Waste and Scrap (in $/lb.)

2013 2014 2015 2016 Imports of:

Primary Pure Magnesium $1.86 $1.86 $1.84 $1.62

Secondary Alloy Magnesium $1.66 $1.57 $1.50 $1.41

While the existing U.S. antidumping duty orders against imports of pure, alloy, and

granular magnesium from China have largely been successful in controlling direct imports of

those products, the resulting higher U.S. prices have made the United States a primary market for

third-country suppliers, such as Israel, Russia, and Turkey. Additionally, imports of inexpensive

substitutes for pure and alloy magnesium, based on scrap from very low priced Chinese ingot

generated in third-country markets, have increased in volume at declining prices, allowing

Chinese magnesium to continue to disrupt U.S. market conditions. Imports of magnesium waste

and scrap have increased 25 percent during the 2013 - 2016 period. 33 This scrap results from

overseas diecasting operations that use low-priced Chinese alloy magnesium as the input.

Diecasting produces significant amounts of scrap - the use of 100 pounds of magnesium in

diecasting operations results in about 40 to 60 pounds of scrap. Magnesium scrap is used as a

substitute for primary pure magnesium as an alloying ingredient by the aluminum industry, and

33 Id.

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is used by the diecasting industry in place of primary alloy magnesium. While magnesium scrap

is used in many of the same applications as primary magnesium, the AUV of such imports was

less than half of the AUV of imports of primary alloy and two-thirds of the AUV of imports of

primary pure magnesium in 2016.

Scrap from extremely low-priced Chinese alloy magnesium used in overseas diecasting

operations also finds its way to the United States as secondary alloy magnesium. The main

import sources of this secondary alloy magnesium are Taiwan, Germany, Canada, and Japan.

Other sources include France, Mexico, South Korea, the Czech Republic, India, Austria,

Hungary, Serbia, and Thailand.34 Secondary alloy products are used as substitutes for primary

pure and alloy magnesium in a wide range of applications. Imports of secondary alloy

magnesium from these sources have increased by 78 percent from 2013 to 2016. As shown in

Table 1, the AUV of such imports fell by 15.0 percent and is far below the AUV of imports of

primary pure or alloy magnesium.

B. US Magnesium's Capacity is [

Following the imposition of antidumping duty orders covering magnesium in various

forms from China, US Magnesium invested significantly in its production facility, both to

increase capacity as well as to capture increased volumes of byproducts, the sales of which offset

US Magnesium's production costs. In the last ten years, US Magnesium has increased

nameplate capacity by two-thirds, and has started spending on projects that would increase its

capacity even more. However, US Magnesium has put its investments on hold, and even its

existing capacity is currently [ ], because of current

market conditions. US Magnesium:

34 See Exhibit 4. Imports from the UK are excluded from this analysis. These are very high-priced specialty alloys used to make gravity castings.

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• Currently has access to sufficient raw materials to produce a larger volume of

primary magnesium;

• Has unused cell capacity, as it has shut down the cells that supplied ATI, has

postponed rebuilding of other electrolytic cells, and has plans to cut an additional

[ ] MT of capacity in 2017 and 2018 by taking down additional electrolytic

cells;

• Has invested [ ] to expand capacity, but put such plans put on hold due

to deteriorating market conditions. Significant investments include [

].

C. Imports of Magnesium Have Caused Serious Adverse Effects

Over the years, US Magnesium has sought, and received, relief from imports of

magnesium from China. However, this relief has not been sufficient to ensure US Magnesium's

continued operations. US Magnesium first received relief against imports of pure magnesium

ingots from China in May 1995. 35 Following the imposition of that antidumping duty order,

imports of pure magnesium in ingot form fell sharply. However, following that action, imports

of granular magnesium increased rapidly, and a petition was filed against such imports, with

relief being granted in November 2001. Following this order, imports of granular magnesium

fell, and imports of alloy magnesium increased. US Magnesium sought, and received, relief

35 See Exhibit 12. The imports subject to this order include pure magnesium as well as "off-spec pure" magnesium, which contains less than 99.8 percent magnesium but does not meet an ASTM specification for alloy magnesium. Thus, the investigation and orders covered the imports entering under the HTS number for pure magnesium as well as most, if not all, of the imports entering under the HTS number for alloy magnesium.

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against imports of alloy magnesium from China as well, with an antidumping duty order issued

in April 2005. While US Magnesium enjoyed significant benefits from these actions, these

benefits have not been sustained.

Despite the fact that unwrought forms of magnesium from China are generally covered

by antidumping duty orders with high deposit rates, US Magnesium is still harmed by imports.

First, imports of downstream products have increased. For example, US Magnesium previously

sold significant volumes of pure magnesium ingots for the production of granular magnesium

that was then converted into desulfurization reagents. After U.S. imports of granular magnesium

from China were subject to duties, imports of magnesium desulfurization reagents, largely from

China, increased, taking over that segment of the market. This is true for magnesium anodes as

well.

Furthermore, because the Chinese magnesium industry is so dominant globally,

producers in third countries have shifted significant volumes to the U.S. market, as imports from

China cause severe price depression in third-country producers' home markets and export

markets, in order to take advantage of the higher U.S. prices. Of course, while U.S. prices

remain higher than in markets where Chinese magnesium trades freely, the increase in imports

from other sources has suppressed U.S. prices dramatically as more and more sources compete to

sell magnesium in the United States, and the gap between U.S. and other market prices has

narrowed significantly. 36 Moreover, as noted above, there has also been a significant increase in

volumes of secondary alloy magnesium and magnesium scrap. As Chinese alloy magnesium is

used in third-country markets, the scrap metal generated is often either shipped to the United

States or converted into secondary alloy in other countries and shipped to the United States.

36 See Exhibit 13 Slide 25.

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This is evident from the U.S. import statistics. While import volumes have not increased

uniformly, the sourcing of imports has shifted, and import values have fallen, taking U.S. prices

with them. For example, with respect to pure magnesium, Israel was the largest import supplier

in the 2012 to 2017 period.37 In 2012, Israel accounted for over 80 percent of total imports of

pure magnesium. By the first quarter of 2017, Israel accounted for only 46 percent of imports,

with imports from Russia gaining significant share at very low prices. It is easy to see how

imports from Russia gained share: the AUV of such imports was only $1.31 per pound in the

first quarter of2017. Total imports of pure magnesium have increased in 2017, with imports

from low-priced sources such as Russia and Turkey accounting for the increase.38 This price is

significantly below US Magnesium's prices, allowing imports from Russia to displace US

Magnesium at numerous customers. From 2012 to Ql 2017, the average unit landed duty-paid

value of imports fell from $1.98 per pound to $1.52 per pound, a decline of over 23 percent.

A similar pattern exists with respect to imports of alloy magnesium. Israel has

consistently been the largest import supplier of alloy magnesium, accounting for over 50 percent

of total imports in 2012 and 2013.39 By 2016, Israel accounted for only 31.5 percent of total

imports, with imports of secondary alloy magnesium, made from scrap produced from Chinese

alloy magnesium, increasing sharply. From 2012 to 2016, the average unit landed duty-paid

value of imports under this HTS category fell from $2.61 per pound to $2.34 per pound, a

decline of over 10 percent. However, as shown in Table 1 above, the AUV of such secondary

288154

37 See Exhibit 11.

38 Id.

39 Id.

- 19 -

NON-CONFIDENTIAL

alloy magnesium imports fell by 15. 7 percent and is far below the A UV of imports of primary

pure or alloy magnesium.

The decline in U.S. prices has been significant. Industry publication Platts Metals Week

reports weekly spot transaction prices for imported pure magnesium in the U.S. market. This

price declined from a high of $2.60 per pound in February of2010 to only $1.455 per pound in

April 2017, a decline of $1.145 per pound, or 44 percent.40

As non-Chinese producers have competed in the U.S. market, and particularly as low­

priced imports of scrap and secondary alloy have increased in volume, both largely based on the

use of Chinese magnesium in other markets, prices have fallen significantly. 41 In addition to the

absolute decline in price, the spread between magnesium prices in the U.S. and other markets has

narrowed substantially.

While US Magnesium enjoyed several years of substantially improved performance due

to the antidumping duty orders, the dynamics described above have placed considerable pressure

on U.S. magnesium prices, and thus US Magnesium's viability. As described above, US

Magnesium's electrolytic production process does not permit US Magnesium to tum its cells on

and off in the near-term based on market conditions. Instead, US Magnesium is forced to

maintain its production levels, and meet the lower prices offered in the U.S. market in order to

keep its plant operating. Export markets are not a viable outlet for US Magnesium's production,

for the same reason that third-country producers are eager to sell into the U.S. market: prices in

other markets are very low in comparison to the U.S. market because of China's unrestricted

access.

40 See Exhibit 14.

41 See Exhibit 13, Slide 25.

-20-288154

NON-CONFIDENTIAL

While U.S. prices remain above Chinese levels, they are currently [

] The AUVofUS Magnesium's sales have fallen from

[

]

In response to deteriorating U.S. market conditions, [

]

This decline in prices and increase in costs necessarily had an adverse effect on US

Magnesium's profitability. In FY 2012, US Magnesium's operating income was almost [

] percent of sales.42 By FY 2016, operating income had fallen to [

percent of sales. During the November 2016 -March 2017 period, US Magnesium [

].

42 US Magnesium's fiscal year runs from November 1 through October 31.

- 21 -288154

NON-CONFIDENTIAL

For FY 2017, US Magnesium's most recent projections show continued deterioration.

US Magnesium projects its sales volume to decline by [

] These changes are expected to result in [

]

D. Without Relief, the Domestic Magnesium Industry Will Suffer Further Injury

Without relief, the recent downward trends experienced by US Magnesium are likely to

worsen. There has been no interruption in the factors causing these trends, and none is expected.

Despite the enormous level of unused capacity in China, capacity continues to be added.

The largest addition to capacity is the 100,000 MT Qinghai Salt Lake Magnesium plant.43

According to Qinghai Salt Lake Magnesium, construction of the plant is complete, and

magnesium production began in January 2017 .44 Plans for this plant include expanding capacity

to 400,000 MT.45 While this is the largest expansion in Chinese capacity, the 2015 Minerals

Yearbook identifies two additional increases to capacity in the Chinese industry.46

Increases in third-country magnesium capacity are also planned and underway. A slide

presentation at the International Magnesium Association's 2017 conference shows plans to add

capacity in Canada, India, Turkey, Iran, and Australia. Given the level of global oversupply in

the magnesium market, a significant portion of this increase in capacity is likely to be aimed at

288154

43 See Exhibit 15.

44 Id.

45 See Exhibit 8 at 45.3.

46 Id.

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NON-CONFIDENTIAL

the U.S. market.47 Although the financial viability of these plans is uncertain, domestic

magnesium production will remain under threat from numerous sources in addition to China.

These proposed increases in capacity are not linked to increases in demand. The most

recent estimates from the U.S. Geological Survey show the global magnesium industry operating

at just above 50 percent of capacity.48 Global production in 2015, the most recent year for which

U.S. Geological Survey data are available, declined 3 percent from 2014 levels.49 Decreased

production in China was attributed to declines in consumption in China and in its export

markets. 50 Additions to capacity are clearly not being driven by demand factors.

In the United States, one significant U.S. consumer of magnesium, ATI, closed its

titanium plant in Rowley, Utah, causing U.S. demand for magnesium to decline by [

]. US Magnesium supplied this plant, and its closure makes US Magnesium

even more vulnerable to the effects of imports.

Due to the conditions in the U.S. market, US Magnesium is reducing its production.

Once capacity is shut down, it cannot easily be restarted. The electrolytic cells that supplied ATI

have been shut down, removing [ ] MT of capacity. US Magnesium plans to cut [

] . These combined shutdowns amount to the removal of over [ ]

MT of domestic capacity to produce magnesium. These capacity reductions are harmful to US

Magnesium for multiple reasons. As already noted, an electrolytic cell that has been shut down

288154

47 See Exhibit 13, Slide 30.

48 See Exhibit 8.

49 Id.

50 Id.

-23 -

NON-CONFIDENTIAL

cannot simply be restarted. It must undergo an extensive, and expensive, rebuilding process,

which can take many months. While a cell can be rebuilt in three weeks, US Magnesium has

only a limited number of workers trained to do this very specialized work. Therefore, only one

cell can be rebuilt at a time. Furthermore, significant lead time is required for the materials

necessary to rebuilt the cell. The anode, for example, takes approximately six months to procure.

The cost to rebuild one of US Magnesium's larger electrolytic cells, including labor and

materials, is approximately [ ].

The capacity reductions are further harmful to US Magnesium because of the high fixed

costs associated with its plant. US Magnesium's plans to increase capacity over the years have,

in large part, been made with a goal of spreading those high fixed costs over a larger volume of

production. The closure of capacity has the effect of raising per-unit production costs, making it

more difficult for US Magnesium to compete in the long term. In addition, the planned

reductions in production volume make it likely that US Magnesium would have to terminate

skilled workers. The specialized workforce needed to build and operate these unique electrolytic

cells will be lost. Such workers have at least 10 to 20 years of experience, and are not easily

replaced in a short period of time if conditions warranted the return of capacity to production.

In addition to the reductions in production, US Magnesium has a number of plant

improvements that it has started to implement, but put on hold because of the deteriorating

conditions in the market. In 2014, US Magnesium announced its plans to increase nameplate

capacity to 76,500 MT. Instead, it has taken capacity offline. In order to reach 76,500 MT, US

Magnesium would have had to build additional electrolytic cells and complete the recently

constructed spray dryer to increase the availability of magnesium chloride feedstock. While US

Magnesium began implementing this program, it stopped when it realized that it would not have

-24-288154

NON-CONFIDENTIAL

additional demand for capacit)r, and would instead be lowering its production levels. While the

electrolytic cells can be rebuilt and the [ ], current

and expected conditions in the U.S. magnesium market do not warrant the necessary capital

expenditures. At the public hearing held in conjunction with this investigation, several U.S.

aluminum producers noted that, while military applications account for only a portion of U.S.

aluminum production, the industry must rely on healthy conditions in the commercial segment of

their business to ensure the availability of aluminum for military applications. US Magnesium

faces the same conditions with respect to the magnesium market.

E. Any Relief on Imports of Aluminum Should Include Imports of Important Inputs Such as Magnesium

Magnesium production is essential to U.S. national security due to its necessity in the in

the production of many products, including aluminum, which is essential to national security.

Any import relief granted in this investigation should include relief for the domestic magnesium

industry as well. While the domestic magnesium industry has sought and won relief against

unfairly traded imports, the protection is not sufficient to overcome the distortions of the global

magnesium market caused by the enormous Chinese industry and its massive overcapacity.

These conditions make the U.S. market, and its relatively high prices, a highly desirable market

to any third-country producers who prefer not to compete with China's extremely low prices.

US Magnesium urges the imposition of relief in the form of tariffs on imports of pure

magnesium (HTS 8104.11.0000), alloy magnesium (HTS 8104.19.0000), magnesium waste and

scrap (HTS 8104.20.0000), granular magnesium (HTS 8104.30.0000), magnesium reagents

(HTS 3824.99.9295), and magnesium anodes (HTS 8543.30.9000).51 Allowing the current

51 US Magnesium believes that the conditions of competition in the magnesium industry would make quotas and tariff-rate quotas far less effective in providing relief.

-25 -288154

NON-CONFIDENTIAL

conditions to continue without relief would likely result in the eventual closure of the sole

remaining U.S. producer of primary magnesium. The United States would lose an industry that

is essential to national security, eroding its manufacturing base, as well as a highly skilled, well

paid workforce that has been in place for decades. Without a domestic industry, the existing

antidumping duty orders would be irrelevant and eliminated, and third-country producers that are

viable largely due to the higher U.S. prices would start to fail as well. China would be the only

remaining source of magnesium to the U.S. market.

V. CONCLUSION

The Department of Commerce should find that imports of magnesium in various forms

threatens to impair the national security of the United States and include relief from such imports

in any remedies ordered in the Aluminum 232 investigation.

Please contact us if you have any questions.

Jennifer Lutz

ECONOMIC CONSULTING SERVICES, LLC 2001 L Street, NW, Ste. 1000 Washington, D.C. 20036 (202) 466-7720

Economic Consultant for US Magnesium LLC

- 26 -288154

Respectfully submitted,

Isl Stephen A. Jones Stephen A. Jones Benjamin J. Bay

KING & SPALDING LLP 1700 Pennsylvania A venue, NW Washington, D.C. 20006-4706 (202) 737-0500

Counsel for US Magnesium LLC

NON-CONFIDENTIAL

Exhibit List

1. The Magnesium Industry in Transition, Marvin B. Lieberman, August 17, 2000

(http://www.anderson.ucla.edu/faculty/marvin.lieberman/publications/MagnesiumindustryTr

ansition2001.PDF)

2. [ ]

3. [ ] 4. U.S. Geological Survey Data on U.S. and Chinese Magnesium Capacity

5. Noranda to Shutter Quebec Magnesium Plant, American Metal Market, March 25, 2003

6. Norsk Hydro to close Quebec Magnesium Plant, American Metal Market, October 31, 2006

7. Timminco Workers Sign Labor Deal, American Metal Market, June 5, 2007

8. U.S. Geological Survey, 2015 Minerals Yearbook: Magnesium

9. Pechiney's Magnesium Plant to Stay Shut, American Metal Market, October 16, 2001

10. Porsgrunn Magnesium to End, American Metal Market, October 14, 2001

11. U.S. Imports of Magnesium

12. U.S. Imports of Pure, Alloy, and Granular Magnesium from China

13. Global Primary Magnesium Supply and Demand Balance, 2016

14. Metals Week U.S. Dealer Import Price for Pure Magnesium 15. Qinghai Salt Lake 2017 Slide Show

288153

EXHI IT 1

The Magnesium Industry in Transition

By Marvin B. Lieberman 1

The Anderson School at UCLA, Los Angeles, CA 90095, USA

Abstract. Dow Chemical dominated the magnesium industry for decades but ultimately exited in 1998. This article considers the evolution of the industry and Dow's decision to divest.

Key Words: Capacity,· dominant film, exit, limit pricing, magnesium.

I. Introduction

Few economists are familiar with the industrial history of magnesium, the lightest metal in

commercial use. For much of the twentieth century, the Dow Chemical Company dominated world

production of magnesium and maintained a position of near-monopoly in the United States. To deter

entry when commercial demand for magnesium began to grow appreciably in the 1960s, Dow

employed a remarkable range of tactics, including announcements of excess capacity, limit p1icing, and

sophisticated price discrimination.2 Moreover, Dow's production efficiency, honed through decades of

experience, was widely recognized. Yet by the end of the century Dow's advantages had eroded, and

significant entry occurred in the US and especially abroad. Faced with growing import competition,

falling prices, and a storm~damaged plant, Dow exited the industty in November 1998.

This a1ticle describes the evolution of the magnesium industry and its current status.3 It begins

with an overview of magnesium's uses and production methods, and concludes with an assessment of

Dow's exit decision.

1. Magnesium's ApP-Iications and Markets

Initially used as a pyrotechnic material in bombs and flares, magnesium now has diverse

applications. These include "structural" uses in aerospace, automotive, and other products that take

1 I thank Ken Corts and Deborah Kramer for helpful comments. This aiticle gives interpretations of Dow Chemical's actions, and I retain full responsibility for errors. 2 These tactics are considered in detail in Lieberman (1983, 1998). 3 Extensive information on the magnesium industry can be obtained from the US Geological Survey web site, http://minernls.usgs.gov/mincrals/pubs/commodity/magnesium/. Kenney ( 1979) provides historical perspective.

Marvin B. Lieberman 8117/00

advantage of magnesium's light weight.4 Additional applications exploit magnesium's extensive

chemical prop~rties. About half of all magnesium produced today is added to aluminum alloys to

enhance their characteristics. Magnesium's single largest use is in aluminum "flip-top" cans, where

about ;2.5% magnesium content is essential.

Unlike other metals that trade on a global market at a reasonably uniform price, the markets for

magnesium have been fragmented. For many years magnesium producers such as Dow were able to

maintain price discrimination, facilitated by sizable US imp01t tariffs. 5 Tariff reductions have curtailed

the scope for such practices, leading to a more uniform market. The US duty on imported magnesium

ingot foll from 40% in the 1960s to 8% by the mid-1980s, with most imports from Canada and Israel

now fully exempt.

2. Production Teclmolog)(

There are two principal methods for making magnesium: the thermic process and the

electrolytic process. Small-scale producers have generally utilized the thermic process in which

dolomite, an abundant ore, is heated until magnesium vapor is given off. Entry is relatively easy for this

technology, which has low capital cost but high operating costs. Prior to the rationalization of world

magnesium tariffs, most major developed countries had at least one thermic plant.

Electrolytic plants are capable of attaining lower average total cost than thennic plants. Dow

was a pioneer in the development of electrolytic technology. In the electrolytic process, an electric

current is applied through magnesium chloride obtained from underground brine or sea water. While

the electrolytic process for magnesium is similar to the standard Hall process for making aluminum,

cost-efficient operation of a magnesium plant has required a considerable amount of tacit engineering

knowledge. In recent years, however, know-how has become more widespread as foreign producers

have gained experience and process improvements developed in the former Soviet Union have become

available for license. With technology less of a barrier, access to cheap energy has become more

important, thus favoring plant locations outside the United States.

4 Magnesium's density is 112 pounds per cubic foot, compared with 175 pounds for aluminum and 449 pounds for steel.

5 To utilize excess capacity in the 1960s, for example, Dow sold magnesium to buyers in Germany at a discount of up to 40% off the US market price. Moreover, magnesium alloys with elastic demand were often priced at a discount by Dow.

Marvin B. Liebcmrnn 8/17/00

2

II. Industry Evolution

1. Early Growth Driven by Wartime Demand

Wartime surges in demand shaped the magnesium industry dming the first half of the twentieth

century. Prior to 1915 Gennany was the world's sole source of magnesium. With the British blockade

of Gennany during World War I, seven magnesium plants were built in the United States, although only

those of Dow Chemical and the American Magnesium Company (AMC) were commercially significant.

The end of World War I led to a drastic decline in the demand for magnesium. All of the

magnesium plants in the US were shut down except for those operated by Dow and by AMC, which

became a subsidiary of Alcoa. In 1927 Dow and AMC signed a patent cross-licensing agreement, and

they set up an arrangement that granted AMC the right to purchase magnesium from Dow at a

significant discount from the market price. Dow then expanded capacity, and AMC closed its plant

Dow thus became the only US magnesium producer from 1928 until the outbreak of World War Tl.

By 1938, the eve of World War II, the four major magnesium-producing countries were

Germany with 12,000 tons per year capacity, Britain with 5,000 tons per year capacity, the US (Dow)

with 3,300 tons per year capacity, and France with 2,500 tons per year capacity. During World War II,

magnesium production capacity expanded enormously throughout the world. German capacity reached

a peak of 34,000 tons through the expansion of existing facilities. Furthermore, as the war progressed,

the Ge1mans built new magnesium plants in Austria and Norway.

Wartime expansion of magnesium production in the US statted in 1940 when Dow doubled the

capacity of its Midland, Michigan, plant and started construction of a new plant in Freeport, Texas.

During 1941-1943, fifteen new magnesium plants were built in the United States, thirteen by the US

government. Dow operated only one of these government-owned plants (at Velasco, Texas, not far

from the Freeport plant). By the end of the war the US production capacity for magnesium increased by

a factor of nearly one hundred, to 291,000 tons per year. 6

6 The outbreak of war in Europe did not prevent the application of antitrust law in the United States. In 1941 the Justice Department charged Dow, Alcoa, and I. G. Farben of Germany with price-fixing and the use of patent cross-licensing to monopolize magnesium production in the US. The companies pleaded no contest and signed a consent decree that called for compulsory patent licensing and the dissolution of prior patent agreements.

Marvin B. Liebennan 8/17/00

3

2. Postwar Deve1012ments

After the war, production of magnesium decreased drastically. US production foll from a peak

of 184,000 tons in 1943 to only 5,300 tons in 1946. Germany was prohibited from producing

magnesium. Moreover, most of the German plants were located in what became the Soviet zones of

Germany and Austria. The Russians dismantled the plants and took them back to the USSR.

As the war ended, Dow closed its original plant at Midland because of improved economies at

its Freeport, Texas plant. All of the government plants were closed by November 1945. Thus, Dow's

Freepmi plant remained the only plant in the US producing magnesium after the war. Post-war US

magnesium production rose very modestly from 5,300 tons in 1946 to 15, 700 tons in 1950, which was

significantly below the 18,000 ton capacity of the Freeport plant.

The Korean War revived magnesium production. Dow increased the capacity of its Freeport

plant to 24,000 tons per year. Seven government-owned magnesium plants were reactivated and by the

end of 1951 were producing at 70% of capacity. Overseas, Norsk Hydro Elektrisk (a private company

with majority ownership by the Norwegian government) began reconstruction of the German-built plant

at Heroya, No1way, at 12,000 tons per year capacity in 1950.

After the Korean War demand for magnesium decreased, and virtually all the US government­

owned magnesium plants were again shut down except the Velasco, Texas, plant operated under lease

by Dow. The US govenunent established a public auction to sell the Velasco facility, which was by far

the most efficient of the magnesium plants built by the government dwing World War II. Prior to the

auction, Dow operated the Freeport and Velasco plants at capacity to build a magnesium stockpile.

Dow proved to be the sole bidder for the Velasco plant, which was subsequently closed for four years

as Dow drew inventories down.

While Dow dominated the post-war production of magnesium in the US and worldwide, an

important constraint on Dow's pricing was the existence of a US government-owned stockpile amassed

for emergency wartime use. At its peak, this government stockpile contained enough magnesium to

supply all US consumption for several years or more. The government made periodic sales from the

stockpile, which was gradually depleted and eventually tenninated in 1975.

Marvin B. Liebennan 8117/00

4

3. Entr,y Deterrence by Dow

In 1958 a new entrant, Alabama Metallurgical Corporation (Alamet), began construction of a

new 6,000-ton-per-year thennic plant, partly to serve the market for high-purity magnesium, which

Dow was unable to supply. By the mid-1960s, several firms announced their intention to enter into

magnesium production, attracted by magnesium's growth potential and by prospective refinements in

process technology. In addition, the major aluminum producers were known to be considering entry

into magnesium.

Presumably, Dow recognized that significant entry would have made magnesium more of a

commodity, which would have reduced Dow's margins and ability to price discriminate. Dow

unde1took a series of sophisticated actions and announcements to deter these potential entrants:

" Dow committed to a six-year "price incentive program" of gradual price cuts to buyers in

the aluminum alloying industry. The details of this program were designed to deter entry by

the technologically-advanced aluminum makers, such as Alcoa. Dow could have cut price

immediately but chose instead to commit to a schedule of time-phased reductions. By doing

so, Dow minimized its revenue loss while still sending a credible signal on its likely

production costs.

" For other buyers Dow continued its policy of pricing magnesium ingot slightly below the

production cost of a thennic plant. This limit pricing policy was reinforced by periodic

announcements of excess capacity and efficiency gains, which signaled the potential for

price cuts if large-scale entry occurred. For example, in 1965 Dow announced a series of

incremental capacity expansions obtained by improving the electrolytic cells at its plants.

One year later Dow reported that it was reactivating large amounts of idle capacity at the

Freeport plant. And in 1967 Dow announced construction of a new magnesium plant

located in the Pacific Northwest. Dow built part of this plant but then put construction on

hold.

Thus, Dow announced excess capacity, signaled low costs, and contractually guaranteed low

prices to a targeted set of buyers. These deterrence tactics, which have been considered at some length

Marvin B. Lieberman 8117/00

5

in the economics litcrature,7 appear to have forestalled large-scale ent1y into the US magnesium

industry in the 1960s. Two start-ups entered the industry but soon encountered serious technical

problems with their plants. Moreover, by the end of the decade, Alamet closed its small therrnic plant

after years of marginal results. 8 Thus, by the early 1970s Dow found itself once again the sole producer

of magnesium in the United States.

4. Dow's Strategic Shift

The early 1970s were a turning point for Dow. The firm shifted from its "limit-pricing"

strategy, designed to maintain Dow's position as the dominant magnesium producer, to a "skim

pricing" type of strategy intended to maximize more immediate returns. (Figure l plots the price of

magnesium ingot from the 1950s through the 1990s.) Dow ended its "price incentive program" in

1971, raising the price paid by the aluminum companies from 30.25 cents to 36.25 cents per pound. By

the following year, growth in US demand had absorbed all of Dow's excess production capacity.

Dow's ability to raise prices was constrained briefly by wage and price controls imposed by the US

government. When these controls were lifted in 1974, Dow responded by doubling the price of

magnesium ingot, followed by additional price hikes. In part, such price increases were needed to

cover the post-OPEC rise in energy costs. But the pattern suggests that Dow was now striving to

maximize short-te1m profitability while cutting back on investment in the magnesium business. For

example, in 1972 Dow sold its magnesium research library to Battelle Laboratories and transferred

magnesium R&D staff to other business units. Dow's production capacity peaked in the 1970s and

then declined as the firm chose not to expand or even renew its existing facilities.

Responding to these developments, Alcoa entered the magnesium industry, opening a plant in

Washington state in 1976. NL Industries, one of the announced entrants of the 1960s, struggled with

its technologically-troubled plant at the Great Salt Lake. AMAX, Inc., acquired this plant in 1980,

brought it to design capacity, and then sold it to Magnesium Corporation of America (MCA). Yet

despite the entry of these two large-scale magnesium producers in the United States, Dow's skim

7 See, for example, Spence (1977), Dixit (1980), Bulow et al. (1985) and Lieberman (1987) on excess capacity; Gaskins (1971), Milgrom and Roberts (1982) and Harrington (1986) on limit pricing; and Aghion and Bolton (1987) on contractual barriers to entry. While Dow's behavior may seem consistent with theories on the use of excess capacity as an entry deteITcnt, it is important to note that Dow exploited capacity built by the government during World War II. Dow understood how to use excess capacity as a strategic weapon but never built such capacity when required to pay the full investment cost. 8 Following Alamet's exit, the US market for high-purity magnesium was supplied by imports.

Marvin B. Lieberman 8/17/00

6

pricing strategy seems to have been comparatively successful. The inflation-adjusted US market price

of magnesium held at historically high levels for more than a decade. Moreover, Dow's share of US

capacity remained above 60%, even though the firm's world market share steadily declined.

5. The Rise of Imgorts

Dow's position weakened considerably in the 1990s. Tariff reductions, expansions by foreign

producers, and the fall of communism made the magnesium market more global and increased the

pressure on magnesium prices in the United States. Norsk Hydro, the world's second largest

magnesium producer and a major refiner of aluminum, opened a large-scale magnesium plant in Canada

in early 1990.9 Much of the plant's output was exported to the United States, where magnesium prices

fell sharply. MCA filed an anti-dumping suit, which blocked fu1iher imports from Canada until the mid-

1990s. Concurrently, the disintegration of the Soviet Union in 1991 led to an intensification of

competition in the world magnesium market. Magnesium producers in the fonner Soviet states of

Russia, Ukraine and Kazakhstan turned to exports as means of generating hard currency. Average US

prices dropped significantly in 1992, and a two-tier pricing system was established, with import prices

below the transaction prices charged by US producers. In 1994, MCA initiated further anti-dumping

actions against shipments from Russia, the Ukraine and China. With the cessation of US imports from

these countries, as well as from Canada, prices rose substantially in 1995.

With the resolution of the dumping investigations by the U.S. International Trade Commission,

imports resumed in 1996 from Russia and Canada. This led to an immediate drop in prices, followed

by continued price reductions over the next few years. The US became a net importer of magnesium,

and by 1997 imports had grown to exceed Dow's annual production capacity. The trend was forecast

to continue for the foreseeable future, as new entrants announced plans for additional large-scale

magnesium plants in Australia, Canada, the Netherlands, and elsewhere.

6. Dow's Exit

Beleaguered by imports and the erosion of its cost advantage, Dow's magnesium operations

were further hit by natural catastrophe in 1998. Dow's remaining magnesium plant at Freeport, Texas,

was struck by lightning in June and flooded by Hurricane Francis and other rainstorms in August and

9 Industry experts believed that this plant achieved cost efficiencies exceeding those of Dow.

Marvin B. Lieberman 8/17/00

7

September. Dow declared a "force majcure" and then announced on November 20 that it was shutting

the plant, cffoctive immediately. This abrupt closure ended Dow's hist01y of more than 80 years in the

magnesium industry, serving as the world's largest producer from World War II through the mid-

1990s.

Dow's exit signaled the declining role of US producers in the increasingly global magnesium

industry. The principal countries importing magnesium to the United States from 1995 to 1998 were

Canada (52%), Russia (22%), China (12%) and Israel (5%). In 1999, the year after Dow's exit, the

world's major magnesium producing nations were the United States (22% of world output), Canada

(23%), China (16%), Russia (13%), Norway (9%) and Israel (6%). Norsk Hydro had emerged as the

world's largest magnesium maker, with plants in Norway and Canada accounting for slightly less than

one-fourth of world magnesium output. A quarter century earlier, Dow's world market share had been

twice as great, and Dow was the sole producer in the United States, from which it exported heavily.

Assuming that many of the announced magnesium plants are completed by new entrants around the

world, this trend toward globalization and declining concentration should continue through the early

part of the twenty-first century.

Ill. Conclusions

The hist01y of the magnesium industry illustrates the rise and fall of a dominant finn, a process

that has been documented for many industries (e.g., Rosenbaum, 1998). Factors leading to Dow's

success have been common among dominant firms: early entry, cost efficiency, and strategic deterrence

behavior. What seems unusual about magnesium, though, is that Dow appears to have made a

conscious choice to relinquish its position. This strategic shift occurred in the early 1970s, when Dow

began to "harvest" its magnesium business rather than invest beyond its Texas plants. Dow switched

from a "limit pricing" strategy designed to deter entry, to a "skim pricing" type of strategy that

ultimately sacrificed the firm's viability as a magnesium producer.

Why did Dow make such a choice? Unlike Dow, other dominant firms have opted to expand

preemptively in related industries (e.g., DuPont in titanium dioxide (Ghemawat, 1984) and Alcoa in

aluminum prior to 1945). One potential explanation is that Dow's cost advantage was not sustainable.

Dow's production process benefited from years of incremental improvements but was not

Marvin B. Liebennan 8/17/00

8

fundamentally different from the technology potentially available to others. (DuPont, by comparison,

had pioneered a more differentiated process for titanium dioxide.) Moreover, Dow's cost advantage

was due in part to simple economies of scale. Dow was the only magnesium producer with electrolytic

plants of efficient scale in the decades following the Second World War. Given modest demand for

magnesium during peacetime and a potential global market fractured by tariffs, there were no

opportunities for enhy of another efficient-scale plant until the US market expanded sufficiently in the

1960s. Later, as demand grew and tariffs fell, such plants could be sited in many locations around the

world.

Constraints relating to "economies of scope" may also have made continued expansion

unattractive for Dow. Dow's cost advantage arose partly from economies specific to the Texas plant

complex where Dow's magnesium process utilized byproducts ftom other chemical operations. Such

advantages could not be easily replicated at other sites, and the supply of byproducts may have limited

Dow's ability to expand internally. Moreover, while Dow may have enjoyed economies of scope in

magnesium production, on the marketing side magnesium had little in common with Dow's core

chemical businesses. Magnesium was thus a potential candidate for divestiture as Dow sought to focus

and restructure its operations in the 1980s and 1990s. 10 At the same time, price hikes on magnesium

provided cash flow in a period of transition that was difficult for Dow and for the chemical industry

generally.

Continued expansion in magnesium would also have risked antitrust scrutiny. Alcoa's policy of

aggressive capacity expansion was condemned by Judge Learned Hand in his Supreme Court rnling

against that company in 1945. Similar investments by Dow to maintain dominance would surely have

attracted Justice Department attention in the 1970s.

Thus, many factors contributed to Dow's decision to divest. Taken as a whole, Dow's actions

and the industry's evolution show how dominant positions can erode in capital-intensive, homogeneous

product industries where technological change takes place relatively slowly. Over a period of decades,

the forces of demand growth, tariff reduction, and technology diffusion have transformed magnesium

from a specialty material with a dominant producer into a commodity product with a competitive global

market. While such trends toward globalization and declining concentration can be seen in many

industries, seldom do we observe such a dramatic decline by a dominant firm.

10 In the early 1990s Dow unsuccessfully sought a buyer for the Freeport plant.

Marvin B, Liebe1man 8/17/00

9

REFERENCES

Aghion, P. and P. Bolton (1987). "Contracts as a Barrier to Enh-y," The American Economic Review 77(3): 388-401.

Bulow, J., J. Geanakoplos and P. Klemperer (1985). "Holding Idle Capacity to Deter Entry," The Economic Journal 95: 178-182.

Dixit, A. (1980). "The Role ofinvestment in Entry-Dete1Tence." The Economic Journal 90: 95-106.

Gaskins, D. (1971). "Dynamic Limit Pricing: Optimal Pricing Under Threat of Entry." Journal of Economic Theory.

Ghemawat P. (1984). Capacity Expansion in the Titanium Dioxide Industry. The Journal of Industrial Economics XX.XIII: 145-163

Harrington, J. E. (1986). "Limit Pricing when the Potential Entrant is Uncertain of Its Cost Function," Econometrica 54(2): 429-438.

Kenney, G. B. (1979). An Analysis of the Energy Ejficiency and Economic Viability of Expanded Magnesium Utilization, Garland Publishing, New York.

Lieberman, M. B. (1983). "The U.S. Magnesium Industry (A), (B), and (C)," Stanford University, Graduate School of Business, case S-BP-231.

Lieberman, M. B. (1987a). "Excess Capacity as a Barrier to Entry: An Empirical Appraisal." Journal of Industrial Economics 35(June): 607-627.

Lieberman, M. B. (1998). "Dow Chemical and the Magnesium Industry." In D. L Rosenbaum, ed., Market Dominance, Praeger, Westport, CT.

Milgrom, P., and D. J. Roberts (1982). "Predation, Reputation, and Entry Detenence." Journal of Economic Theory 27(2): 280-312.

Rosenbaum, D. I., ed. (1998). Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Pe1j'ormance, Praeger, Westport, CT.

Spence, A. M. (1977). "Entry, Capacity, Investment and Oligopolistic Pricing." The Bell Journal of Economics 8: 534-44.

Marvin B. Liebetman 8/17/00

10

Figure 1: Price of Magnesium Ingot

2.5---------------------------, -1992 Dollars

--Current Dollars

2

"'C c: ::l 1.5 0

D.. !... (]J

Q. II) ... ~ 1 - -···· 0 Cl

0 " " ... " " " ... 1954 1958 1962 1966 1970 1974 1978

Year

1982 1986 1990 1994 1998 Source: US Geological Survey, Metal Prices in the United States through 1998. (Yearend price of 99.8% purity ingot, updated) .

EXHI IT 2

ENTIRE EXHIBIT NOT SUSCEPTIBLE TO PUBLIC SUMMARY

E HIBIT 3

ENTIRE EXHIBIT NOT SUSCEPTIBLE TO PUBLIC SUMMARY

EXHI IT 4

1,800,000

1,600,000

1,400,000 i='" 2 5

1,200,000

1,000,000

800,000

600,000

400,000

0

Primary Magnesium Production Capacity in China and the United States (in metric tons)

·------·...-,. 90.0%

*' ~<· S0.0%

!L .. ____ .. ···--··-~ 70.0% "

f/ --;;;

60.0%

Chinese capacity as ~

; 50.-0%

% of global capacity i •

~-,,,,

1--------------------.c "------~ ;... 40.0%

1----------------"---------·---------J ' 30.-0%

1------------b: ' 20.0%

10.0%

~ 0.0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

- Chinese Capacity - U.S. Capacity "'""' .. Chinese capacity as% of Global Capacity

WDRLD ANNUAL PRIMARY MAGNESIUM (Metric tons)

Total 500,000 497,500 523,000 523,000 486,000 426,000 497,000 601,000 621,000 722,-000

China as% of Total 5.2% 5.2% 6.2% 6.2% 24.7% 28.2% 37.8% 44.9% 48.6% 55.7% 61.9%

Source: USGS Minerals Yearbook, various years.

65.-0"/o

WORLD A.."INUAL PRIMARY MAGNESfUM (Metric tons)

188,000

Total 886,000 1,080,000 l, l 70,000 . l 12.:l:Q'"O!l9_b~:20,QQQ~!·.~l!Q2QQQ).,11Q,Q.Q~!.,!l.~~QQ~~~.Q~J,.~Q{l±Q()_(L

China as% of Total 67.9% 80.8% 8L5% 83.1% 8L8% 81.2% 80.4% 84.6% 84.7% 842%

EXHI IT 5

611612017 Noranda to shutter Quebec magnesium plant I American Metal Market

COPYING AND DISTRIBUTING ARE PROHIBITED WI THO UT PERMISSION 0 .F THE PUBLISHER

No1·anda to shutter Quebec magnesium plant Mar 2r,, 200~ ! 09:1 o PA'f I

Noranda Inc. has finalized its decision to close the Magnola magnesium plant in Danville, Quebec. The Toronto-based company confirmed that the shutdown, slated to begin next month, is "for an indefinite period of time, until market conditions allow for a viable operation of the plant."

Noranda, which holds an So-percent stake in the operation, announced its intention to close Magnola in January (AMM, Jan. 29), but held talks with 20-percent owner Socit Gnrale Financement de Qubec (SGF) before finalizing the decision.

SGF, a government agency, initially said it would look at ways to keep the plant open and lobbied the Canadian Minister for International Trade to consider imposing dumping duties on Chinese magnesium imports (AMM, Feb. 5).

Two weeks ago the decision to close the plant was delayed while further negotiations between Noranda and SGF took place. It now appears that those talks failed to bear fruit and Noranda will begin to lay off Magnola's 380 workers by the end of next month. About io workers will remain on site after the shutdown to maintain the plant, Noranda said.

A spokeswoman for SGF did not return calls seeking comment Tuesday.

Bob Sippel, president ofN oranda subsidiary Mtallurgie Magnola Inc., decried the impact that Chinese imports have had on Magno la.

"Although we believe in a positive future for magnesium, we are facing reality head on and adjusting to the developments that have occtmed in the marketplace, including increased production from China," Sippel said.

Magno la's sho1t operating life was plagued vv'ith technical problems that prevented the plant from ever operating at nameplate capacity. However, Noranda praised the achievements of the Magnola work force.

"Magnola employees have accomplished important challenges and have demonstrated that it is possible to produce quality magnesium with mining residues with no impact on the environment," said Mike Agnew, vice president and general manager ofMtallurgie l\fagnola.

http:/lwww.amrn.com/Article/2552931/Noranda-to-shutter-Quebec-magnesium-plant.html?Print=lrue 1/1

EXHIBIT 6

3/24/2010 Norsk Hydro to close Quebec magnesiu ...

AMM.com Norsk Hydro to close Quebec magnesium plant

By Meg.hmm McDonell Published; Oct 31 2006 8:55AM

NEW YORK -- Norsk Hydro ASA plans to close its magnesium plant in Canada and exil the magnesium buisncss in the first halfof2007, the company said Tuesday.

Observers said the decision came as no surprise, as the company's magnesium business bas struggled in the face of p!cntifitl low-priced magnesium from Chlna. 11It is primar!ly the extensive export of very low-priced metal from China that is preventing continued production at the world's largest and most environmentally friendly magnesium plant, 11 the company said.

The plan! in Becancour1 Quebec, is closing in line with the conclusion of its l 0-year supply contract with General Motors Co1-p. Hydro was unable to find another buyer to back the project financially.

The plant currently employs about 380 people.

Hydro also plans to divest its magnesium casthouses in Bottrnp, Germany, and in Xi'an, China.

AMM l)l:-;clalrrn.:r/Cnpvright «.;;20 l 0 American Mcial Marlrnt LLC.

arnni .com/2006- j 0-31_08-55-34.html 1/1

EXHI IT 7

3/24/2010 Timmlnco magnesium workers sign lab ...

Timminco magnesium workers sign labor deal

By Meghann McDonell Published: Jun 5 2007 5:0PM

New York~- Workers at Timminco Ltd.'s Haley magnesium plant in Renfrew, Ontario, have signed a new threc­year collective agreement, David T ,ipton, representative of'Local 6946 of the United Steelworkers union\ sold Tuesday.

Only about 20 people will be covered by the new contract, as the company's recent corporate res(ructuring cut about l 80 jobs at l'he Haley plant,

'l11c restructuring began about one year ago when the company found that it could import magnesium from China at a lower cost than nmning the Haley operation.

"Essentially they were able to pw·chase magncsh1m, of a somewhat lower quality---·but that filled the bi!J--.. from China," Lipton safe!. "So they were able to curtail quite a fow oflhcir operations in Renfrew.''

'll1c plant is still producing magnesium with the remaining 10 percent ofits work force, but production lcveL'i have not been disclosed.

The '1g!'coment included a wage increase of 45 cents an hour in lhc fast year, 25 cents in the second year and 15 cents in the lJnal year of the contract.

Workers al lhe plant are .i l'lo set lo receive a higher cost-of.. living alk)\vance and increased life insurance.

/\MM !2t-:c]!tin1~i:~~QJ1Yt'i!!hl_{')2(LIJL6Jnerican iv1otal lvlarkgt I J,C.

amm.corn/2007-06-05 __ 17-00-10.html 1/1

EXHIBIT 8

science for a changing world

15 • I r I r

MAGNESIUM [ADVANCE RELEASE]

U.S. Department of the Interior U.S. Geological Survey

February 2017

MAGNESIUM

By E. Lee Bray

Domestic survey data and tables were prepared by Paula R. Neely, statistical assistant, and the world production table was prepared by Lisa D. Miller,1 international data coordinator.

During 2015, total magnesium imports and consumption decreased slightly. Net imports of magnesium increased slightly. Imports continued to provide a significant share of U.S. supply of primary magnesium as there has been only one domestic producer since 2001. Since 1998, the U.S. share of the world's primary magnesium capacity has decreased to 3% from 30%. During that time period, two of three domestic producers closed and China had more than a twelvefold increase in production. Excluding production in the United States, worldwide primary magnesium production was 972,000 metric tons (t) in 2015, 3% less than the revised I million metric tons (Mt) in 2014 (table 8). Production in China declined by 3% (22,000 t) and in Israel by 26% (6,700 t), accounting for most of the decline in production. China, with 84% of global capacity, accounted for 88% of global production (excluding the United States) (tables 7, 8).

Import prices for magnesium generally decreased throughout 2015 in the United States and Europe, and prices in China also generally decreased as consumption declined slightly in the United States and was stagnant in Europe, and production in China exceeded domestic consumption. The U.S. spot dealer import price for magnesium at yearend 2015 was 9% less than that at yearend 2014. The prices at yearend 2015 in China and Europe were 22% and 20% less, respectively, than those at yearend 2014. However, the Platts Metals Week annual average magnesium price of $2.15 per pound in 2015 was unchanged from the 2014 annual average price.

U.S. consumption of primary magnesium decreased slightly to 65,200 tin 2015 from 65,900 tin 2014. Decreased magnesium consumption for aluminum alloys, castings, the iron and steel industry, and wrought products was partially offset by increased consumption for reducing titanium and other metals. Production of secondary magnesium was essentially unchanged in 2015 compared with that in 2014 (table 1). Consumer inventories of primary magnesium and alloys at yearcnd 2015 increased slightly from those at yearend 2014 and consumer inventories of secondary magnesium and alloys increased by 41 %.

Magnesium is the eighth most abundant element in the Earth's crust and the third most plentiful dissolved element in seawater. Magnesium metal is recovered from the minerals carnallite and dolomite and Jake brines. Magnesium's light weight and ease of casting make it desirable for transportation products. Magnesium readily alloys with aluminum to make aluminum products stronger and easier to machine. Magnesium's strong affinity for halides such as chlorine and fluorine make it useful for reducing metal halides such as those of beryllium, hafnium, titanium, uranium, and zirconium to pure metal. Magnesium's chemical properties also make it useful to remove sulfur from iron and steel.

1Deceased.

MAGNESIUM--2015 (ADVANCE RELEASE]

Legislation and Government Programs

The cover gas sulfur hexafluoride (SF6), which is used to

protect molten magnesium from oxidation, has been identified as a potential factor in global warming. The molten magnesium processes that use SF

6 for melt protection are primary production;

secondary production; die, permanent mold, and sand casting; wrought products production; and anode production. The long atmospheric life (about 3,000 years) ofSF6 and its high potential as a greenhouse gas [23,900 times the global warming potential of carbon dioxide (CO)] resulted in a call for voluntary reductions in emissions. In 1999, the U.S. magnesium industry, the International Magnesium Association, and the U.S. Environmental Protection Agency (EPA) began a voluntary SF

0 emissions reduction partnership. According to the EPA, the

~agnesium industry emitted 1.0 teragrams C02 equivalent ofSF6

m 2014, a decrease of approximately 33% from 2013 emissions. Decreased production of magnesium and magnesium products was cited as the principal reason for the decreased emissions. The decrease was also partly attributed to continuing industry efforts to use SF

6 alternatives, such as NovecTM 612 (dodecafluoro-2-

methyl-3-pentanone) and sulfur dioxide, as part of the industry and EPA's partnership. These alternatives have lower global wanning potential than SF

6 and tend to decompose quickly

during their exposure to the molten metal (U.S. Environmental Protection Agency, 2016b, p. 4-75 to 4-79).

In January 2011, the U.S. Circuit Court of Appeals for the District of Columbia denied U.S. Magnesium LLC's (Salt Lake City, UT) appeal of the EPA's decision to include the company's Rowley, UT, magnesium production facility as a Superfund site. U.S. Magnesium had challenged the EPA's 2008 listing decision and argued that the EPA had overestimated the risk of pollutants from the facility entering the air and soil. Designation of the facility as a Superfund site gave the EPA the authority to further investigate the site to determine ifa cleanup was necessary. The designated site encompasses 1,830 hectares (4,530 acres) on the southwest edge of the Great Salt Lake. Sampling was conducted in 2015 by the EPA and contractors as part of a study of the site, but cleanup activities had not sta1ied by yearend (Fahys, 2011; U.S. Environmental Protection Agency, 20 l 6a).

Production

Because there was only one primary magnesium producer operating in the United States, production data were withheld by the U.S. Geological Survey (USGS) to avoid disclosing company proprietary data. U.S. Magnesium was the sole producer of primary magnesium in the United States. The company recovered magnesium electrolytically from brines harvested from the Great Salt Lake at its 63,500-metric-ton­per-year (t/yr) plant in Rowley, UT U.S. Magnesium was

45.!

expanding capacity of the plant to 76,500 t/yr and revised the completion date to yearend 2016 from yearend 2015 (McBeth, 20 l 6a). Domestic secondary metal recovery from magnesium and aluminum scrap was essentially unchanged from that in 2014. About 84% of the secondary magnesium recovered was contained in aluminum alloys and 16% was contained in magnesium alloy castings, ingot, and other forms (table 2).

Nevada Clean Magnesium Inc. (Canada) expected to complete a bench-scale pilot plant to test recovery of magnesium from dolomite in early 2016. The company planned to produce 30,000 t/yr of magnesium from its Tami-Mosi deposit near Ely, NV, that graded an average of 12.3% magnesium (Nevada Clean Magnesium Inc., 2015).

Consumption

Data for magnesium metal consumption were collected from two voluntary surveys of U.S. operations by the USGS. Of the 54 companies canvassed for magnesium consumption data, 43% responded, representing 55% of the magnesium-base scrap consumption listed in table 2 and the primary magnesium consumption listed in table 3. Data for the 31 nonrespondents were estimated on the basis of prior-year consumption levels and other factors.

Primary magnesium consumption in 2015 decreased slightly compared with that in 2014, which was attributed to decreases of 5% and 8%, respectively, in consumption for aluminum alloys and die castings, partially offset by a l 2% increase in consumption for titanium reduction (table 3). The decrease of primary magnesium consumption in aluminum alloys corresponded to primary and secondary aluminum production decreases of7% and 6%, respectively. Consumption in die casting decreased as several diecasters decreased consumption of magnesium in favor of aluminum {McBeth, 2015). The principal applications for magnesium in the United States in 2015 were reduction ortitanium tetrachloride, zirconium chloride, beryllium fluoride, uranium tetrafluoride, and haftiium chloride to produce metals (34%); alloying aluminum (33%); diecasting (12%); and desulfurization of iron and steel (11 %). Consumption of secondary magnesium scrap for castings in 2015 increased by 5% to 11, l 00 t from 10,500 tin 2014 (table 2). Secondary magnesium recovery was essentially unchanged compared with that in 2014 as increased magnesium recovery from magnesium-base scrap offset decreased recovery from aluminum-base scrap (table 2).

Allegheny Technologies Inc. (ATI) (Pittsburgh, PA) increased titanium sponge production at its plant in Rowley. ATl consumed l t of molten magnesium from U.S. Magnesium's plant for each metric ton of titanium sponge produced. ATI started production at the Rowley plant in 2009 but had not yet ramped up to its full capacity of 10,900 t/yr. ATI planned to ramp up production to about 90% of capacity by yearend and ramp up to full capacity in 2016, if market conditions warrant. The titanium sponge would be used in aerospace and medical applications (Haflich, 2015).

45,2 [ADVANCE RELEASE]

Research and Development

At yearend, the U.S. Department of Ener1,ry's Advanced Research Projects Agency-Energy canceled a research project on a method of recovering magnesium from seawater that was being conducted at the Pacific Northwest National Laboratory (PNNL) in Richland, WA. Announced in 2013, the research was on a low-temperature, low-energy dehydration process for magnesium chloride brine with a catalyst-assisted process to produce an organometallic reactant from magnesium chloride, which then would be decomposed to produce magnesium metal. Although the project succeeded in demonstrating each step in the process, it was canceled when it was determined that commercialization was not likely in the foreseeable future. Global Seawater Extraction Technologies, LLC and U.S. Magnesium partnered with PNNL in the $2.43 million project (U.S. Department of Energy, 2015; B.P. McGrail, Laboratory Fellow, Pacific Northwest National Laboratory, U.S. Department of Energy, written commun., September 15, 2016).

Prices

The Platts Metals Week U.S. spot Western magnesium price range was $2. l 0 to $2.20 per pound throughout the year and the annual average Platts Metals Week U.S. spot Western magnesium price in 2015 was $2.15 per pound, unchanged from the average price in 2014. According to traders and producers, however, U.S. spot Western prices were not representative of the prices paid for most magnesium consumed, as nearly all primary magnesium was purchased through annual contracts (Cowden, 2013; McBeth, 2013, 2014a). Prices for material contracted in the fall of2014 for delivery in 2015 ranged from about $1.80 per pound to $1.92 per pound, with most contracts reported to be in the range of $1.82 per pound to $1.88 per pound (McBeth, 2014b). Prices for material contracted in the fall of 2015 for delivery in 2016 ranged from $ l .67 per pound to $1.80 per pound (McBeth, 2015). The Platts Metals Week U.S. spot dealer import price range was$ l.8 I to $ l .85 per pound in January and generally declined throughout the year to $1.68 to $1.72 per pound in December. The annual average spot dealer import magnesium price was $1.78 per pound, which was 6% lower than in 2014.

The January average magnesium price in China was $2,280 per metric ton and the price generally declined throughout the year to $1,825 per metric ton in December. The annual average magnesium price in China was $2, 116 per metric ton, 14% lower than in 2014. The January average magnesium price in Europe was $2,375 per metric ton and the price generally followed the same downward trend as the price in China, averaging $1,950 per metric ton in December. The annual average magnesium price in Europe was $2,170 per metric ton, 17% lower than in 20 J 4. Abundant supplies of magnesium relative to consumption in China, stagnant demand in Europe and slightly lower consumption in the United States were cited for the price declines (Leung, 2015e).

U.S. GEOLOGICAL SURVEY MINERALS YEARBOOK-2015

Foreign Trade

Total U.S. magnesium exports in 2015 were l l % less than those in 2014 (table 5). Canada (42%), Mexico (25%), and Singapore ( 17%) were the principal destinations. Exports of magnesium metal, alloys, and waste and scrap in 2015 were 13%, 8%, and 53% lower, respectively, than those in 2014. Exports of semi fabricated products increased by 8% compared with those in 2014. Magnesium imports for consumption in 2015 were slightly less than those in 2014 (table 6). Israel was the leading source of imported magnesium metal (70%) and alloys (26%). Since 2001, when the United States imposed antidumping duties on magnesium from China, only minor amounts of primary magnesium ingot have been impo1ied from China; however, China was the second leading supplier of the magnesium alloys and the leading supplier ofsemifabricated magnesium product imports to the United States. China supplied 23% of magnesium alloys and Taiwan was the third leading supplier of magnesium alloy imports (21%). Canada accounted for 47% of the scrap imports, which accounted for l 9% of total magnesium imports (table 6). China supplied 66% of the imports ofsemifabricated magnesium products. Total net imports (imports minus exports) of magnesium were slightly more than those in 2014; net imports of metal and semifabricated products decreased by 14% and 27%, respectively, but net imports of alloys and scrap increased by 39% and 15%, respectively (tables 5, 6).

In July, the U.S. Department of Commerce ruled that certain magnesium alloys jointly patented and developed by Dead Sea Magnesium Co. Ltd. (DSM) (!srael) and Volkswagen AG (Germany) were within the scope of the antidumping duty order on pure magnesium from China. DSM had planned to export magnesium alloy from China to the United States and requested a scope ruling to determine if the patented alloys would be subject to the 111.73% antidumping tariff rate. DSM said it would continue to supply the alloys to the United States from its plant in Israel instead of China (Platts Metals Daily, 2015).

World Review

Global production of primary magnesium (excluding the United States) was 972,000 t, 3% less than was produced in 2014 (table 8). Global primary capacity increased slightly to 1.9 million metric tons per year (Mt/yr) (table 7).

Australia. -Latrobe Magnesium Ltd. continued planning for a 5,000-t/yr primary magnesium plant in the Latrobe Valley, Victoria, which would use fly ash having a high magnesium content as the feed material. Construction was scheduled to start in July 20 l6 and was expected to take about I year to complete. Future expansion to 40,000 t/yr was being considered (Latrobe Magnesium Ltd., 2015).

Canada.--Three companies proposed magnesium projects in Canada. In May, Alliance Magnesium Inc. started a 200-t/yr pilot plant to test recovery of magnesium from asbestos mine tailings in Asbestos, Quebec. lfthe process proves to be commercially viable, Alliance plans to construct a 50,000-t/yr smelter by 2018 (Alliance Magnesium Corp., 2015).

Mag One Products Inc. received a grant from the Canadian Government's Industrial Research Assistance Program to help

MAGNESIUM-2015 [ADVANCE RELEASE]

it develop technology to produce magnesium from asbestos mine tailings. Mag One planned to build a smelter to produce magnesium from asbestos mine tailings near Danville, Quebec (Mag One Products Inc., 2015).

West High Yield Resources Inc. received a permit to extract a 10,000-t bulk sample from a serpentine deposit at its Record Ridge project in British Columbia to test for recovery of magnesium. The company proposed building a mine and smelter to produce magnesium. According to a preliminary economic assessment, measured and indicated resources totaled 10.6 Mt of serpentine grading 24.6% magnesium (West High Yield Resources Inc., 2014, 2015).

C!zina.-According to the China Non-Ferrous Metals Industry Association, China produced 852,000 t of magnesium in 2015, a decrease of 3% compared with that in 2014. Decreased production was attributed to decreased consumption by consumers in China and in its export market. Despite decreased demand and lower prices throughout the year, some producers continued production in anticipation of increased demand at yearend and in early 2016. Although stocks of metal at smelters reportedly doubled from the end of September through the end of October and then increased by 3 7% during November from those at the end of October, many smelters reportedly liquidated stocks in December to obtain cash to repay loans due at yearend. ln April, despite weak demand, producers in Shaanxi Province unsuccessfully tried to set a floor price for domestic sales of magnesium at about $2, 100 per metric ton. The price continued to decline, however, and in November, the producers tried to establish a new price floor at $1,932 per metric ton, but domestic prices declined further as stocks were liquidated at yearend (Leung, 20 l5f-i; Lee, 2016).

In 2015, China exported 206,000 t ofunwrought magnesium, 9.3% less than in 2014, but exports of magnesium alloys increased by 7.7% to 115,000 t. Exports of magnesium powders and granules decn:ased by 11.7% to 77,700 t, and exports of magnesium products decreased by I J .9% to 5 ,000 t. In August, an explosion at the Tianjin port disrupted exports and in December, magnesium exports were temporarily halted from the port as stricter inspections of cargos were carried out (Leung, 2015c, 2016; Yee, 2016a-c).

Century Sunshine Group Holdings Ltd. (Hong Kong) expected to complete expansion of its smelter in Baishan, Jilin Province, to 75,000 t/yr by yearend 2016. In 2014, Century Sunshine expanded capacity to 25,000 t/yr from 16,000 t/yr (Leung, 2015a).

Qinghai Salt Lake Magnesium Industry Co. Ltd. continued to construct a 100,000-t/yr smelter to produce magnesium from lake brines in Golmud, Qinghai Province. Completion, which had been expected in early 2016, was delayed to mid-2016 for undisclosed reasons. Expansion to 400,000 t/yr was planned, but a construction schedule was not announced. Magontec Ltd. (Australia) continued to construct a 56,000-t/yr casthouse in Golmud to be supplied with molten magnesium from the Qinghai Salt Lake smelter (Leung, 201 Sj; Magontec Ltd., 2016, p. 5, 14).

Israel.-Magnesium production decreased by 26% compared with that in 2014 to 19,300 t, principally owing to a strike at DSM [a subsidiary oflsrael Chemicals Ltd. (ICL)J, Israel's

45J

only magnesium producer, that reduced production from mid­February through May. The strike began at ICL's subsidiary, Dead Sea Bromine Co. Ltd., and was joined by its facility that produced chlorine, a byproduct of magnesium metal production. DSM repo1ied that it was able to fill its contracted orders and only capacity used to fill spot orders was affected. On November 30, Israel passed a law increasing taxes on natural resource production. The tax on magnesium production would take effect on January 1, 2017. The new tax rate was 25% to 42% on excess profits and a 5% royalty on the value of magnesium produced (Barry, 2015; Sandler, 2015; Israel Chemicals Ltd., 2016a, p. 225-227; 2016b, p. 75).

Turkey.-In September, Esan Eczacibasi completed construction of a 15,000-t/yr magnesium Pidgeon process smelter in Eskisehir and was evaluating expansion of the smelter to 30,000 t/yr. Rampup to 15,000 t/yr was expected to be completed by yearend 2016 (McBeth, 20 l 6b ).

Outlook

Consumption of magnesium for primary aluminum alloys in the U.S. is expected to decrease in coming years from prior levels because of the shutdown of several primary aluminum smelters at the end of2015 and early 2016. Increased magnesium consumption in the United States by secondary aluminum smelters is expected to offset some of the lost consumption by primary aluminum smelters in coming years. However, magnesium consumption by the aluminum indust1y in other countries is expected to continue to increase as more primary aluminum is produced in countries such as China.

In order to decrease vehicle weight and meet emission targets, automobile manufacturers are expected to use less iron and steel for castings, a trend that could increase global consumption of magnesium. Because of low aluminum prices, some foundries were switching to aluminum instead of magnesium, a trend which could continue if aluminum prices remain low. The use of aluminum sheet alloyed with magnesium in automobiles is expected to increase consumption of magnesium. Because of its higher cost, the use of aluminum sheet in automobiks may be limited to vehicle types with high customer brand loyalty such as light trucks, luxury sedans, and sports cars. Although some automobile manufactures have adopted aluminum sheet, others have signaled that they favor high-strength steel sheet. Some magnesium sheet has been introduced into luxury and high-end sports cars, and further penetration into these automobile types is expected.

Possible new magnesium production in Australia, Canada, and the United States may encourage automotive manufacturers to use magnesium instead of other I ightweight alternatives to steel. Historically, because of the limited number of magnesium producers outside of China, domestic automotive manufacturers were somewhat reluctant to choose magnesium over other lightweight materials, such as aluminum alloys or plastic. Because Chinese producers account for 84% of global primary magnesium capacity, and antidumping duties assessed on magnesium deter imports from China, some automotive manufacturers continue to be cautious about switching to magnesium, thereby limiting the growth of magnesium consumption. Some auto parts manufacturers have expressed

45A [ADVANCE RELEASE]

willingness to produce cast parts in Europe and other locations that do not have antidumping tariffs on magnesium from China. Therefore, magnesium consumption by the automobile industry may increase faster outside of the United States. Consumption of magnesium by the iron and steel industry in other countries is expected to increase slightly (World Steel Association, 2016).

Although some expansion projects are being constructed in China, additional capacity expansions in China are expected to be limited, as production has been only about half of capacity in recent years. The Magnesium Industry Association of Shaanxi forecast that production in China would increase by I 0% per year to 1.3 .Mt/yr by 2020 (Leung, 2015b, d).

References Cited

Allii111ce Magnesium Corp. 2015, Clean tech magnesium pilot plant starts: Brossard, Quebec, Canada, Alliance M~gnesium Corp. press release, Muy J 9. (Accessed August 31, 20 l 5, at http:f/alhancemagnesiu:n,com/clcan­tech-magnrnum-pilot-plant-slnrts/#morc-2845.)

Bany, Scan, 2015, Dead Sea Mngnesium adjusts production as ICL strike action drags: Metal-Pages, April 14. (Accessed June 2, 2015, at http i/wwwmctai­pagcs.com/newslstory/866!3/dcad-sea-magnesium-adjusts-production-as-icl­st rike-uction-drags/.)

Cowden, Michael, 2013, Magnesium prices steady in quiet market: American Metal Market, v. 12 l, no. 10-2, March 5, p. 5,

Fahys, Judy, 2011, Court-Utah company belongs on Superfuml list Salt Lake [UTJ Tribune. January l4. (Accessed January 18, 20 l i, at http.i/www.sitrib .. com/sltriblhome/5105294 l-76/magncsium-epa-company-sile. html ,esp.)

Hafl ich, Frank, 2015, ATT secs full sponge output at Utah facility by yearend: American Metal Markel, v. !23, no, !6-4, Apnl 23, p, 8,

lsracl Chemic~ls Ltd., 20 l 6a, Annual repon for the period ended December 3 l, 20 l 5: Tel Aviv, Jsracl, lsrad Chemicals Ltd., 408 p, (Accessed September 16, 2016, at hllp:/lrepo,icl-group.comlLists/RcportsM:mugemenU %D 7%93%D7%95%D7%97'%D7%9 5%D7%AA%20%D7%9B%D7%A l % D7%A4%D7%99%D7%99%D7%9D%202015120-F PDF.)

fsrncl Chemicals Ltd., 2016b, !CL corporate responsibility report 2015: Tel Aviv, Israel, rsracl Chemicals Ltd , 204 p. (Acc0ssed September 8, 20 I 6, at http://repo.icl-group,com/Lists/RepmtsManagementiother/lCL%20 Corporate%20Responsibil ity%20Report%202015 _ updatcd.pdf)

Latrobe Magnesium Ltd., 2015, Latrobe Magnesium first community briefing for Lntrobe Valley magnesium plant: Sydney, New South Wales, Australia, Latrobe M11gnesium Ltd, press release, November :5 (Accessed September 20, 2016, at http.//latrobemagnesium,com/wp-contcnt/up!oadsf Community-brJcfing-ASX,pd[)

Lee, Winnie, 2016, China's 2015 magnesium output dips!% to 852,100 ml' Platts Mct11ls Daily, v. 5, no .. 23, February 3, p, 5-6,

Leung, Joshua, 20 l5a, Century Sunshine Jan-Sep Mg sales ris~ l ! % to 18,276 mt· Platts Metals Daily, v. 4, no, 228, November 19, p. 7.

Leung, Joshua, 20 l 5b, China Mg output ~xpected to grow I 0% through 2020: Platts Metals Daily, v, 4, no. ! l4, June 12, p, 9-10.

Leung, Joshua, 2015c, China's 2015 magnesium output, exports ~xpected to fall: Plaits Metals Daily, v. 4, no. 214, October 30, p. 9

Lc>ung, Joshua, 2015d, China's 2015 magnesium output to rise 10°/.r-CNIA: Platts Metals Daily, v. 4, no, 9, January 14, p. 4.

Leung, Joshua, 20I5e, China's January-October magnesium output do•.\Tl 5% on 2014: Platts Metals Daily, v. 4, no, 233, November26, p. 5-6,

Leung, Joshuu, 20151; China's key magnesium producing regions record first production dedine in live years: Pla!ts Metals Daily, v. 4. no. 180, September 14, p. l, 10,

Leung, Joshua, 201 Sg, China's magnesium stocks up 37% to ! 4, l 90 mt at end Nov: Platts Me:als Daily, v. 4, no, 250, December 21, p. 5

Leung, Joshua, 2015h, China's Oct magnesium stocks double from Sep: Platts Metals Daily, v,4, no,224, November 13, p, 8-9.

Leung, Joshua, 201 Si, Market participants wary after China's Shaanxi magnesium producers set price ftoor: Platts Metals Daily, v. 4, no, 223, November 12, p. l, 3,

Leung, Joshua, 2015j, Qinghai Salt Lake completes first phase of Mg smelter: Platts Metals Daily, v. 4, no. 98, l\fay 20, p. 7.

Leung, Joshua, 2016, Chinese magnesium supply tightens as smelters clear stocks: Platts Metals Daily. v. 5, no, 6, January 1 I. p. 6,

US. GEOLOG!CAL SURVEY MfNERALS YEARBOOK-20!5

Mag One Producrs Inc , 2015, Mng One receives financial support from the Canadian Government: Surrey, British Columbia, Canada, Mag One Prmluets Inc. press release, November 3. (Accessed September 20, 2016, ut h!tpi/m;igoneproducts com/ _resources/news/2015 l I 03,pdf)

Magontrc Ltd., 2016, Annual report 2015: Sydney, New South Wales, Australia, Magontec Ltd., 76 p. (Accessed September 22, 2016, at http ://m gl, l ive,1rmau, com/I RM/ compuny/showpage.uspx/PD F s/ l 624-112~ 737571Annuulrcport20 I 5.)

McBclh, Karen, 20 J 3, US magnesium sees wide rn11gcs with little spot activhy: Platts Metals Daily, v, 2, no, 33, February 15, p. )-6

Mc Beth, Karen, 21l I 4a, Magn~sium spot stability carries through to 20 l 5 deals: Platts Metals Daily, v, 3, no 253, December 24, p. 5-6.

Mc Beth, Kuren, 2014b, US Al buyers deep in 20 l 5 magnesium contract talks: Platts Metals Daily, v. 3, no. 200, October I 0, p, 7-8.

McBeth, Karen, 2015, US magnesium contracts settle lower, with wide variuncc seen in ditforent sectors: Platts Metals Daily. v. 4, no. 230, November 23, p, 1, 12.

Mc Beth, Karen, 20 l 6a, Allegheny 'li:chnologics to idle Utah titanium sponge plant; affects US Magnesium: Platts Metals Daily, v, 5, no, 167, August 25, p. i, 6.

Mc8cth, Karen, 2016b, Turkish magnesium producer Esun at 25% of capacity: Plu:ts Metals Daily, v. S, no, 96, May 17, p. 7-8,

Nevmla Clean Magne$ium lnc, 2015, Bench scale pilot furnace fabrication upd~te. Vancouver, Briiish Columbh1, Canada, Nevada Cicun Magnesium Inc, press release, December 2, (Accessed September 9, 2016, at http://www.rwvt1dat•mi.com/newsfnews-story?newswire l ! O=id"1;,J 041 &new~ wirel l l=page%3D3.)

Piam Metals Daily, 2015, DSM suys unaffocted DOC ruling on Mg imports from China: Platts Metals Daily, v. 4, no. i 47, July 29, p. 5-6.

Sandler, Neal, 2015, Dead Seu Magnesium uni\m demands clarification on plant's fate' Platts Metals Daily, v. 4, no. 2 l 5. November 2, p. 6.

U.S. Department of Energy, 2015, Extracting magnesium from seawater Richland, WA, lLS, Department of Energy, Pacific Northwest National Labord!OP/ Web site. (Accessed September 14, 2016, ~! http://urpa-e.energy, gov/'!q=slick-shect-project/extrac!ing-magnesium-seawatcr,)

U.S. Environmental Protection Agency, 20l6u, EPASuperfond Program-US Magnesmm, Tooele County, UT: U S. Envirnnmental Protection Agency. (Accessed September 12, 2016, at https://cumulis.epa.govfsupernpad/cursites/ csitinfo.cfm ?id=0802 704.)

U.S, Environmental Protection Agency, 20 I 6b, rnventory of U,S, greenhouse gas emissions and sinks-1990-2014: U.S. Er.vironmentul Protection Agency 430--R-16.-002, April 15, 558 p, (AcccsscJ September 9, 2016, at !ittps·/fv.rww cpa,gov/ghgemissions/m;-greenhouse-gus-inventory-rcport- l 990-20l 4#data.)

West High Yield Reso\lrces lnc, 2014, West High Yield Resources Inc.: Calgary, Alberta, Canada, West High Yield Resources Inc, (Accessed August 3 l, 2015, at http://whyresources com/.)

West High Yield Resources Inc,, 2015, West High Y\eld announces two 10,000 tonne bulk sample permit approvals: Calgary, Alber~1, C1mad11,

MAGNESllJM-2015 [ADVANCE RELEASE]

West High Yield Re:;ot:rces Inc. press release, November 3. (Accessed September 20, 2016, at http://www.whyresources cmn/_rcsources/news/ nr_2015_1 l._03.pdf.)

World Steel Associatior:, 20 I 6, July 20 i 6 crude steel production: Brussels, Belgium, World Steel Association, A11gust 22. (Accessed September 20, 2016, at https:J/www worldsteel ,org/medin-centrc/press-rele<lses/20 i 6/July-20 l 6-crude-steel-product1011 l .html.)

Yee, Alvin, 20 l 6a, China's Dec Mg alloy exports rise 5% to l 0,955 mt: Platts Metals Daily, v_ 5, no. 18, January 27., p. 5-6,

Yeio, Alvin, 2016b, China's Dec Mg powder, granules, chips exports slip 6%: Platts Metals Daily, v. 5, no .. 18, Jamrnry 27, p. 6,

Yee, Aivln, 20!6c, China's Dec unwrought magnesium exports down 27% on year: Platts Metals Daily, v. 5, no, 18, January 27. p, 4-5.

GENERAL SOURCES OF INFORMATION

U.S. Geological Survey Publications

Evaporites and Brines. Ch. in United States Mineral Resources, Professional Paper 820, 1973.

Historical Statistics for Mineral and Material Commodities in the United States. Data Series 140,

Magnesian Refractories. Ch. in United States Mineral Resources, Professional Paper 820, 1973.

Magnesium, Mineral Industry Surveys, quarterly. Magnesium, Its Alloys and Compounds. Open-File Report

01-341, 2001. Magnesium MetaL Ch, in Mineral Commodity Summaries,

annual. Magnesium (Mg), Ch. in Metal Prices in the United States

Through 2010, Scientific Investigations Report 2012-5188, 2013.

Magnesium Recycling in the United States in I 998. Circular 1196-E, 2004.

Other

Economics of Magnesium Metal, The (11th ed.). Roskill Information Services Ltd., 2013,

Magnesium. Ch. in Mineral Facts and Problems, U.S. Bureau of Mines Bulletin 675, 1985.

Magnesium and Magnesite in the CIS in 1996. Roskill Information Services Ltd., 1996

45,5

TABLE J

SALIENT MAGNESIUM STATISTICS'

(Metnc tons unless otherwise specitled)

to avmd disclosing cumpany "'"'"""'''"'." 1Data are rounded to no more than three significant digits. 2Source; Platts Metals V/eek,

45.6 [ADVANCE RELEASE]

TABLE2 MAGNESIUM RECOVERED FROM SCRAP PROCESSED IN TIIE

UNITED STA TFS, BY KlND OF SCRAP AND FORM OF RECOVERY 1

(Metric tons)

in "Other"

17,200

38,000 ' 55 200'

653

80,200 t

w 10,500 68,900 r

20,200

37, too 57,400

606

80,000

w l I,100 67,300

'Data are rotmdcd to no more than three significant digits, may not add to totals showrL 1lnciudes secondary magnesiam content of both secondary and primary alloy ingot 1lncludes chemical and oth~r dissipariw uses. cathodic protection, und data indicated by symbol W

U.S. GEOLOGICAL SURVEY MINERALS YEARBOOK-2015

TABLE 3

U.S. CONSU'.11PTION OF PRIMARY MAGNESIUM, BY USE1

{Metric tons)

8,700 8,020 278 291 660 635

- 2,340 ! ,92:: 12,000 l 0,900

22,600 1,010 7,800

627 19,900

21,500 l,030 7,300

491 22,300

l

are to no more !hrne significant digits; muy not add to totals shown. 2Includes sheet and plate and forgings. 3Inciudes chemicals and scavenger, deoxidizer, and powder.

TABLE4 YEAREND MAGNESIUM PRICES

Source: Platts Metals W~ek.

MAGNESIUM-2015 [ADVANCE RELEASE] 45.7

TABLES U.S EXPORTS OF MAGNESIUM, BY COUNTRY'

J .080 $3,960 435 $1,340 1,980 6,860

3

382 950 59 162

2,600 10,300 ll ll 22 44

144 338 2,410 7,310

234 469 12 32 3 8 2,500 10,300

24 48

are rounded to no more than three significant digits; may not add to totals shown. 2Less than Yi \!nit.

Source: U.S. Census Bureau.

45.8 [ADVANCE RELEASE]

l,450 $5.490 15 $180 82l 3,000 344 9,750

19 218 199 5,280

92 !0,500 5,7!0 22,600 185 5,910

22 2,720 39 174 326 !2,000

482 1,830 67 225

3,420 l l,200 443 20,800

34 243 145 4,120 64 9,680

3,420 12,900 122 5.800 l 5 16 3,630

(2) 8 !28 8,!40 1 20 94 8,8 !()

US. GEOLOGICAL SURVEY MINERALS YEARBOOK-20!5

TABLE 6

U.S. IMPORTS FOR CONSUl-.WT!ON OF MAGNESIUM, BY COUNTRY'

7,670 $18,200 l,200 $1,490

97 238 JO 29 109 241 95 45!

l l,700 49,800 (Z) 7

156 563

3,560 6,960 20 so 2,350 7,760

464 l,250 1,350 4,170 (2) 23

9,960 19.800 l,130 1,230 228 520 (2) 2 602 1,530

9,910 42,200 \2) (2) 5

226 850 3,550 6,740 c:n 6

1,870 6,030

'Data are rounded to no more than three significunt digit;;; may not add t<l totals shown 'Less than Y, unit

Source: U,S. Census Bureau

TABLE 7

295 778 673

4,170 313

43

2,950

l,190

476 2,560

563 2,980

939

53 40

WORLD ANNUAL PRIMARY MAGNESIUM

PRODUCTION CAPACITY, DECEMBER 31, 2015 1

(Metric tons)

on standby basis

MAGNES!UM-2015 [ADVANCE RELEASE]

l ,600,000

900 34,00()

30,000

I0,000 15,000

80,000 6,000

15,000 22,000

$995 2,720 2,320

18,400 1,030

127

8,890 16,700

l ,290

8,760

J,930 13,700

3,050

ribbons, wire, other forms,

l,U50 $4,530

6,170 !6,700

89 362

67

621 4,100

45 258 (Z) 258

36 l,950

1,190 4,980

4,460 11,500

57 180 7 599

12 354

6i0 4,300

69 442 (1) 37

45.9

TABLE 8

MAGNESnJM: EST!lv1ATED PRIMARY WORLD PRODUCTION, BY COUNTRY1.2

(Metric tons)

26,300 27,300 27,400 26,000 19,300

21,400 r 21,200; 13,000 f 9,500 r 8,100 2,500 7,500 10,0DO 10,000

20()) l 150 58,000' 65,000' 66,000' 62,000 r 60,000

to company not in •• Zero 1Totals and estimated datu are rounded to no more than three significant digits; may not add to totals shown, 21ncludes data available through October 4, 2016. 3Reportcd figure, 4lncludes magnesium consumed for titanium sponge production.

45, I 0 [ADVANCE RELEASE] U ,S. GEOLOGICAL SURVEY MINERALS YEARBOOK-2015

EXHIBIT 9

6116/2017 Pechlney's magnesium plant to stay shut I J\rnerlcan Metal Market

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER

Pechiney's magnesium plant to stay shut Oci16.2001 I p9.·g1 PM I

Europe's only magnesium producer, Palis-based Pechiney SA, will keep its unprofitable Marignac plant closed.

"There is nothing we can do with the business and we have decided to close it," a company spokesman said, adding that Pechiney's aim now was to find other jobs for about 200 workers atthe plant. "We would like to create anew business in the plant for recycling, but there is no time scale for this yet."

Pechiney has blamed aggressive Chinese magnesium sales for depressing the European magnesium price and consequently damaging the company's profits. Marignac produced about 16,000 tonnes of magnesium per year, the bulk of which was sold in Europe.

"The Chinese have taken about 30 percent of the European market in the past five years and we can't compete with their piices," the spokesman said. European free-market magnesium prices have fallen to about $i,700 to $1,800 per tonne on a duty-paid delivered basis from around $i,950 to $2,050 per tonne at the beginning of the year. The Chinese free-market price currently stands at about $1,250 to $1,260 per tonne f.o.b.

Marignac lost about 40 million French francs ($5.6 million) last year and the spokesman said that losses this year were likely to reach FF6o million to FF70 million ($84 million to $g.8 million).

Pechiney is not the only casualty of an aggressive selling policy by Chinese magnesium producers. Norway's Norsk Hydro AS last week announced that it was ending magnesium output at its Porsgrunn plant in Norway, which produced about 42,000 tonnes per year (AMM, Oct. 15).

The closures look set to pave the way for Chinese producers to gain dominance in Europe, particularly as anti-dumping duties against imports are going to be hard to justify if there is no European business to protect

http:/lwww.amm.com/Artlclel2571489/Pechineys-magnesium-plant-tcrstay-shut.html?Print=true 1/1

EXHIBIT 10

6116/2017 Porsgrunn magnesium to end I American Metal Market

COPYING AND DISTRIBUTING ARE PROHIBITED W1THOUT PERMISSION OF THE PUBLISHER

Porsgrunn magnesium to end Octr<J,2001 I 02:19PM l

Norsk Hydro has decided to end production of primary magnesium at its Porsgrunn plant in Norway. The decision, taken at a board meeting Friday, was opposed by three board members elected by Porsgrunn employees.

Porsgrunn produces 42,000 tonnes per year out of Hydro's total magnesium capacity of 87,000 tonnes per year (its other plant is at Becancour, Quebec). Some 600 jobs, including 350 employed directly in smelting, wi11 be lost as production at Porsgnmn is wound down by April next year.

The company blamed low-priced ex-ports from China which have gained "almost 40 percent of world markets."

Hydro's president and chief executive officer, Eivind Reiten, who indicated earlier this year that some of the loss-making magnesium production may be cut, srdd, "The penetration of the Chinese into the global magnesium market represents a permanent change that we simply have to adapt to. Without drastic measures now we shall be looking at heavy losses for many years to come."

http:llWwW.amm.comiArticle/2571418/Porsgrunrr-magnesium-to-end.html?Print=true 111

EXHIBIT 11

Pure Magnesium Imports for Consumption

HTS Number 8104, 11,00!JO {QuanLty in Metric Tons, Lan®d 01.lty P<ltdValue irt USD,AUVin $/Pound)

2012 2013 2014 2015 2016 J.:inua!I ~ Man'.:h 20·1G J>n""!Y· Mnrch 2G17

Quantity Value AW Quantity Value AUV Quantity Value AUV Quantity Value AUV Quantity Value AUV Quantity Value AUV Quantity Value AUV

---Country

'""'" 13,2S7 $ 59,"86,209 $ Vl4 10,519 $ 46,379,6$2 $ 2,00 11,715- s 50,937,586 $ ],97 9,906 $ -43,231..530 s :i.98 8,836 $ 3-'$,225,634 $ l.81 ],334 s 10,007,<l!ll $ 1,90 1)354 7,26~.079 s 1.7.S

RUS"iUJ 833 $ 3,COS,890 $ 1.64 1,196 > 4,147~sn s LS7 2,300 $ 8,388,499 s 1.65 l,SOS $ 6,900,911 s ,L5i:; 1,856 s 5.398,585 $ L32 440 '$ t,299,678 s LM- J,30$ $ 3,182,244 $ L31

C...ariada l!>S s 1, 183,0bZ. S 0.71, 1;163 $ 1,753~3.86 $ O,'!.& l,1% $ l,'l.11,881 $ 0.51 1,U8 ; l,'102,~9 s 0+52 1,239 $ l,361,Ef,O $ O.':iO l?J $ 24&,431} 5 0,65 28.:1 $ 291,419 $ OA7

Bra.ii! 706 s 4,C83,4SS $ 2.Gl sso $ 5,036,<31 $ 2,6" 702 s 4,131,012 $ 2.67 S94 $ 3,276,SU $ l.50 73S $ 3,407,997 $ 209 164 $ 764,llSS $ 2.U 250 $ 1,100,400 s 2,00

Kazald;st.an SllS $ 2,417,'267 $ 1.87 1,083 s 4,274,807 $ l.W lS6 $ 660,863 $ l,92 226 $ 941,65.3 s '.l.SS 338 $ 1,200,952 s 1.61 72 $ 261,8S7 $ 1,65 SS $ 17S,1.S7 $ 1,4S

Turk~y 6 $ 24,'314 s 1.84 s $ s 320 s l,010,170 s 1.A3 <> s M,369 $ 1.53 250 $ 779,Ci90 $ 1-42

Taiwan 0 $ 11,304 $ 89.95 0 s 10.704 s 118...42 $ $ 7 s 16,951 $ l,14 $ s Polilnd $ s s $ 4 s 11,632 5 l,28 4 $ U,ll:ll S L28 s China 56 $ 450,439 $ 166 2 $ 13,2'0 $ 456 $ a S 2.879 $ 42.13 0 s 15.6'20 s 4243 0 s 1~311 $ '57,% $ Austri<l $ s 3$ $ 20G,701 $ 2,46 27 $ 1.27,,546 $ 2.H 0 $ 2,920 $ 9.74 0 $ 2,"10 $ 9,74 $

United Kintdom 4 $ 20,689 $ 2.15 0 s J!J,93$ $ 7'5,48 0 $ 26,164 $ 219,77 0 $ 36,723 $ 23],,35 0 s 31,13.Z $ 2041.i5 0 $ B,082 $ 24823 9 $ 25,531 $ 126

Korea, South 0 s 3,40; s 14.84 s $ 9 $ U3,176 $ 551 s $ $ Japan s 0 > 3~961 $ l,7%.68 0 s 7.863 $ 3,.566.60 0 $ 61096 $ 76.Bl s $ Mexico $ $ :m $ $1,068- $ 1.LI) 0 s 6,HS $ 79.57 $ $ Spain $ $ $ 0 $ S,6S2 $ 156.37 $ $ Federal Republic of Germ.oiny $ $ 95 $ S01,G17 S 239 s $ Netherland!. $ s 0 s 3,2.0S $ 1,45'.L77 $ s s Norwav $ L13 s 404,372 s 1.62 $ s $ $ lnd1'* 0 s 3,320 $ 13,10 l s S,500 $ ra2 $ $ s s FranQ'I- s 0 s 2,917 s 1,32"1,67 s s s $ Austrnh;:t 16 s 123,S4S $ 3.5'> $ $ $ $ s· s 5iocapcre

___ o $ 2.6.77 ~~-- _s~~-·- --~-- ___ • __ $ --- ---· ,$ ____ , __ --- --- --- s ___ -_ ·--

Total Countries 16,249 11.0l9,136 $ 1.98 is,1s1 s n2,on,s11 $ 1.86 lG,2i8 $ 615,426,459 $ 11!6 13,796 $ 55,.951,726 $ 1.84 13,338 47.686,253 1.61. 3,2fi2 lZ.696,231 i.n 4,006 $ 13,424,740 $ '-52

Source': U.S. Wnsus eurt!au Official lmport-Suth.Ucs for the follnwfng HTS nt.unbt!r:

8104,lLOOOO

Country Israel faiwan Federal Republic of Germany

United Kingdom

Canada J<ipan Czech RepubHc Hung;ny

Korea, South Me:iclw

Thailand

China Serbia

France Poland

Russia India

Au~trla

Malaysia

Netherlands

Italy

Total C.Ountries

Primary Alloy

~ondury Alki/

Quanuty

3,892 $ 1,371 $

502 s 1,00$ $

94 $ 292 $ 20/ $ 134 $

$ 59 $

3S S $

20 $

$ 97 s

$ s $ $ $

7,772 $

4,02:8

2,739

2012

Value AUV

18,016,884 $ 2.10 5,126,975 $ 1.70 2,029,191 s l.83

15,560,957 $ 7.03 365,852 $ 1,77

1,052,008 s 1.64 1,312,020 $ 2.23

467,795 $ 1.58

191,155 $ 1.46

141,776 s 1.67

78,243 s l.77

320,075 $ 1A9

44;662~931 $ l.61

18,478,73$ $ 2.08

10,623,739 $ J,76

Quantify

4,691 1.750

219 1,0-09 $

269 $ $

202 $ $ $

164 s s

f,0 s $ $ $

20& $ $

20 $ $

2013

Value AUV

21,393J132 $ 2,07

6,315,993 s 1.64 879,070 $ 1.82

16,756,465 $ '7.53

$29,655 $ 1.40

959,8!1 $ 2.16

517,517 s 1-43

231~595 $ 1-75

691,900 $ 152

81,2.SS $ 1.88

$ 2,SSO $ 108.86

--- ~$ ___ _

8,590

4,957

2,624

48,659,346 $ 2.57

22,316,627

9,586,254

2,()4

1,66

Alley Magnesium Imports for Consumption

HTS Numbec 8104.19.0000 (Quantity in Menic Tons, Landed Duty Prnd Value in USO, AUV in $/Pound)

2014

Quantity Value AUV

4,168 2,946

617 1,192

295 313

s 18,874,916 s 2.05 S 9,786,810 $ :LS! $ 2,269.111 S L67 $ 18,016,457 $ 6,86

s 998,363 $ 154 s 1,105,314 $ 1,60

147

269 $

$ $

43 $ $

21 $ $

0 5 $ s

94

1 $

s s

10,106 $

4,189

4,725

1,294,107 $ 7,18

390,772 s 1.21 127,860 $ 1.35

89,•Wl $ 1.90

2,590 $ 5.59

325,738 $ 1.57 7,401 $ 454

53,288,840 $ 2.39

18,964,317 $ 2.05

16,308,066 s l.57

2015

Quantrty Value AUV

2,934 $ 13,993,341 s 2 13 2,379 s 7,466,796 s 1.42

563 $ 2,054,416 s 166 816 $ 16,129,659 S S,97

476 $ 1,295,160 $ 1.24 939 $ 3,279,906 S LSS 3S'l S 1,564,063 $ 1.99 n s 26G,s1s $ u'l

43 $ 103,742 $ 1,09 S3 $ 139,165 $ L19

tl $ 3,375 $ 3,38

40 S Ml.,734 S 1.62 4 ~ 27,t.)43 s 3.::J,1

$ s s $

8,725 $ 4S,4liii,121 $ 2.42

3,025

4.RSS

14,139,4511 $ 2.12

16,197,!0S $ 1.SO

Quaotity

2146$

2,223 1,043

690 .$ 566 $ 308 $ 296 $

65 $ 63 $ 56 $ 42 $

9 s

2

$

s 5 $ s $

2016

Value AUV

12,298,821 s 2.26

6,202,674 $ 1.27 3,fi38,B62 $ LS:R

13"~576,416 $ S.93

l,765,760 $ 1.42

1,032,111 $ L52 1,119,866 $ 1.12

714,389 $ !,49 249,220 $ .U3tf

135,780 $ 1.10 110,293 $ 1.19 33,409 $ 1.75

14,914 5 1,21 6,lOS $ l.2Z

15,769 $

7.835 $ 40,414,398 $ 2,34

2,474

4/:172

12,332t230 $ 2.2.6

14, 505)52 $ L4J

1 Although imports: f;orn United Kingdom afe sccond•uy alloy, they are sped:olty alloys that command a premium priei<, and :;ire not indoded in this :analyli.!L

Source: U.5. Census Bureau Offid:at Import Statistics for the: following HTS number: 810:.'t19,0000

January· Marcil 2016

Quantity Value AUV

647 669 256

187

93

132

86 "4

25

2,140

647

1,305

$

$

$ $

$ $

4,107,06$ $ -;l' .. 88

1,805,388 $ 1.22

908,684 $ l.61 3,27S,29S $ 7 ,93

314,937 s l,53

457,451 $ 1S7 347,287 $ l.$4

149,621 s 1.S:l 153,962 $ 2,82

$ 11,SZZ,690 $ 2.44

4,107,065 $ l.S8

4,137,330 s 1.44

January -March 201r

Quantity

1~025

491

140

184 61 40

19 $ $

9'1

31 $

20

$ $ s

$ $

$

Va1ue AUV

4,780,814 $ :412 1,441,90'7 $ 134

499,Rll $ l.62 3,395,361 <$ 8,39

US,472 $ 0.93 130,'ISS $ L49

811139 $ L91

256,244 $ 1,20

91,0lB $ !.3S

53,736 $ L21

2,107 $ 10,862,455 $ 2-0!4

l.025

899

4,780,&14 $ 2,12

2,6<16,280 $ 1,36

country

Granular Magnesium lmporis for Consumption

HTS Number_ 8104.30.0000 (Otrdr>lity In Metric Tons, Landed Duty Paid Value in USD, AUV in SIPound)

2012. 2013 1014 1015 2016 Jan\!i'!)' ·Marcil 2016 January. March 2017

Quantity Value AUV Quantity Value AUV Quantity Value AUV Quantrty Value AUV Quantity Value AUV Quantity Value AUV -Ouantity Value AUV

China 4,601 $ 12,928,898 S l.27 3,651 $ 10,031,412 $ 1.25 5,577 S 14,555,339 $ L18 4,045 S 9,872,705 $ 1.ll 860 $ 1,!!49,518 $ o.98 200 S 414,730 $ 0.'14 .320 $ 729,483 $ 1.03 Cmada SSS $ 4,72•1-1667 $ 2.18 US $ 3,400,3SG S 1.74 1,048 $ 4,521,952 :$ L.96 1,190 $ 5,001,297. S 1,91 7$5 $ 3,421,978 $ 2JJ6 213 $ 861,173 $ 1.83 182 :$ 934i093 $ 2.32: Austria 251 S 1,285,474 $ 2.33 94 $ 671,184 $ 3.27 143 $ 922,390 S 2.93 191 $ 1,136,300 $ 2.70 370 $ 1,807,785 S 221 S9 $ 332,304 $ 255 79 $ 3£9,110 $ 2.12 Australia 36 $ 256,166 S 3.24 11 $ 58,599 S 252 110 $ 320,305 S 1.32 $ SO $ 411,95> $ 3.12 25 S 20S,522 $ 372 S Federal RepuullcofGenmmy 76 $ 510,344 $ 3.04 97 $ Sll,386 $ 2.39 Jl8 $ 2S3,S7B $ 131 48 $ 143,223 $ 1.35 SO $ 143.032 $ 1.7.9 $ 2 $ 6,140 $ 1.22 Israel 6 $ 47,918 $ 3.84 28 $ 183,006 $ 2.96 $ S 34 $ 60,990 $ 0.82 $ 15 $ ll,911 $ 0.37 Turkey $ $ $ 9 S 110.419 $ 5.52 11 $ 140,600 .$ 2~14 14 S 70,3-00 234 $ Switze1land JO $ 226,127 $ 1054 11 $ 267,286 $ 11.oJ 37 S 375,251 $ 4.55 26 S 311,179 $ 5.41 24 S 229,423 $ 4.29 S ll $ 175,555 S 3.7! Korea, South 10 $ SS,000 $ 2.50 $ o $ 9,350 $ !Oo60 S 14 $ 150,003 $ 4,82 14 $ 150,003 $ 422 $ Russia S 28 $ 183,000 $ 2.% 45 $ 281,32.7 S 2.81 69 $ 482,012 $ 3.17 14 S 69,575 $ 232 $ $ Japao 3 s 2.9,001 s 3,99 2 $ 39,0TI $ 8.0S s s 76,751 s 4S! G $ 52,432 $ 4.23 3 s 25,133 $ -a.n 3 s 2S,1T1 $ 3,:n l $ 27,SlO $ 3.83 France $ $ $ S 3 $ 16,860 $ 2.RO S 3 $ lll,460 $ 3.07 Belgium $ S S 11 S 90,680 $ 3.70 $ $ $ Netherlands $ $ l $ 5,333 5 302 $ $ $ $ India $ $ 0 $ S,487 S 36.€0 S $ S S er."'1 ~ s s>3,61s Ll±!. ___ s ___ s ___ s __ . -· s ______ . ___ s __ __, _ s ___ . __ _

Total Count.Ties G,1.36 $ 20)J97,2i3 $ 1...54 4,807 $ 1S,401(93G $ 1..45 7,058 $ 21,327,CHa $ 1.37 5,595 $ 11,200,24Z $ 'l.39 Z,.204 $ 8f3ZG,853 $ 1..7i 52S $ 2,-059,165 $ 1.71 616 $ 2,2.72,722 $ 1.65

Source~ U.S. Census Bureau Official Import Statistics for the following HTS number: 8104,30JJOOO

Country l..anada

Unfti!d Kingdom

Mex1w Spain

Swltz.erlaod

Korea, SotJth Feder41 Republic of Germany

Au:;tri-a

Taiwan C?e<:h Republk: China

France Nether kinds.

Belgium Austraii;;

fopao

Luxernbourg

Italy

Th<iil;,nd

Sweden Hung.uy

M~lays.i,:j

!Sf~el

Total Countries

Ouantty

9,98$ $ 2,396 s 1,955 s

$ s

193 $ 4$3 s

3,055 $ 87 $

393 $ 1 s

l,GlO $ 64' s

s $ $ s $ s s

2012

Value AUV

19,856,243 $ 0,90

7,721.144 s l.46

5,060,378 $ U7

577,633 $ 1.35

1,213,96$ $ 1..21 1,4051645 s 1010

115,918 $ 0,60

1,019,982 5 l.19

1,245 $ L78 4,826,895 .$ 1,35

l,43"3,8Sl S LOl

40 s 117,934 $ 1.35

37 $ 2s,9W $ a;s ___ o s l,575 ~

20,862 s 49,394,328 s 1.07

2013

Quantity Value AUV

1,(UO

1,38<!

2,879

1&,692,507 s 1.08

S 4,068,979 $ L33 $ 11027,708 $ 1.11 $

1,644

281

2,009

28 $ s $ $ .$ 366

883 s s $

176

664 95 '.$

$ $ s $ $

57 $'

40,9S2 $ 0.67

3,722,588 $ 1 03 '745,SSS $ 1,2(1

5,622,180 $ 1.27

835,872 $ L04

2,731,180 $ 1,40 357,SOS $ 0,92

2,215,472 $ 1.56

24-0,486 s 1.15

173.514 s 1,43 17 s 50,0$7 s l,31

s $ §. __ _

17,516 $ 44,589,558 $ 1.15

Source; U.S. Census Bureau Official lmpo1t Statistics for the following HTS number:

8104.20.0000

Magnesium Scrap Imports for Consumption

HTS Number 81CM,20.00QO

(Quantity in Metric Torra, Landed Duty Paid Valve in USO, AUV in $/Pounc)

Quantity

7,666 s 1,347 s 3,563 $

$ 126 s

1,976 s 109 $

1,216 $ 464 $

!,506 $ 97 s

859 s s $ $ s

39 $ 35 $

s $ $ s $

2014

Value AIJV

18,156,220 $ LOS li,5941732 $ 1.SS

7,000,946 s 0.89

227,331 $ 0.87

2,830,004 $ 0.65 ;t$:?,91~ $ LO~

<,960,724 5 L!O

l,299,016 $ 1.27 4, nS,655 $ l.44

254,379 $ 1$19

2,645,SSB $ 1,40

110,064 l.29 114}J67 $ 1.48

19,002 $ 45,322,516 $ l.08

Quantity

9,960 4,571

3,SSO

$ 83 s

229 60.?,

519

462

SO> 228 310 182

78 20

0 $

2015

Value AUV

19,9.2.3,086 $ 0.91

12,2671195 $ 1.22

6,809,095 s 0.87

209,672 $ us 390,4G4 S 0.77

1,602.{Jl_'.'1 $ 1.'1

748,206 $ 0.65

1,126,160 $ 1.10 964,008 5 0 87

5581471 $ .Lll

8:78,190 $ L2$t

428,376 S 1e07

1$6,040 $ 1.0S

26,069 $ 0,59

4,751 $ 2,155.0l

2'7~301 $ 4.6,121,806 0.98

Ovantity

9,635

5,8$4

2,G23

11717

606

SG& '!48 $ 256 s 249 $ 38 $ 1$ $

0 $ $

21,909

2016

Value

23,294,710 lS,200,873

1,998,809 4,141,734

918,372

562,132 378,.8.?9

299/136

$10,678

83,7:'.L~

45,057 3,(J54

AUV

110 1-Al

0.69

t.09 U.69

OAS OA9

0.53

0,93 0.99

L32 S 1~G~7A)

52,447,007 s 1,09

Janu•!Y • March 201 G

Quanbty

i:,718

l,685

6S4

176

295

20

93

S2

.,

Value AUV

6,326,004 $ uro S,299,170 $ 1,43

1,065,291 $ 0-74

~48,443 $ LlS.

320,tSS $ 0.49 52,.910 $ 1.23

127,73~ $ 059

1741372 $ 0.95

S,7Z7 $ 13,814,067 $ 1.09

J::mu;lry - March 2017

Quantity

1.673 1,034

891 137

1'.l4

~o

$ $

Vatuc AUii

3,1'59,411 $ OJ~6 3,lS0,909 S 138

1,4s.2,os1 s n.74 323,177 $ 1-07

75,311 s 0,25

33,359 $ 038

3,909 $ a,194,230 S-0.95

country C.anada Israel

United Kingdom Mexico Taiwan Russia Spain Federa! Republic of Germany

China

Urazil Korea~ South Switzerland Austria

Turkey Kaiakhstan

Qech Republic,

Japan Hungary Au!>tt.:i!i-0

lh~1land

Poland ~ERB!A

ftanc;e

Netherlands. Belgium India

ltalv Luxembourg

Malaysia Notway

Swedi:m 5lngapore

2012

Quantity Vatue AUV

ll,819 17,184

3,405

2,014 1,459

s ]5,119,874

$ 77,753,SSG

$ 23,302,790

1.CO

:ws 3.10

1.18

1.63

L62 931

l,031 4,700

361 204

$ $ $ $ $ $ $ $

lO $ 3,306 $

$ $

6

585

660 $ $ $

l9S 174

52 $ $ $

$ 1,640

G4S $

s $

Q $ $ $

37 $

s

5,251,$33

5~254,197

3,328,965

3,753.500 13,524,358

4,917,076

636,036 .2;.t0,127

8,691,U9

24,314

2,417~267

2,342;002

$ L6S $ L31

$ 2.59 $ 1.42 $ 10.$4

$ 1.19 $ 1.84 $ 1.87

$ 1,61

l,081,009 $ L6G 585,729 $ 1.53 380,ll4 $ 3.33

4,905.138

1.433,851

3,320

28,920

136 1.01

$ 13,10

0 35

___ o S 2.833 i1§1L

Quanuty

9,547 $ 15,237 $

2,397 $ 3,044 $ 2.116 s 1,430 $

$ 59S $

3,83$ $ 880 $

UM$ 39 $

2.1i2 $ s

1,083 s 1,0SS $

2 s $

l1 $ S7 $

s $

564 $ 9S S

s s s $ $

113 $ 17 s

s

2013

Value AUV

L:?,675,934 $ 1.08

67,955,790 $ :a.o:i 20,865,429 $ 3.95 7,545,225 $ 1.12

7,162,569 $ 1.54 5,022,772 $ l"S9

2.136,011 s 1.62 10,GSll,735 $ l.25

5,036,431 $ 2.60 3,722,SS& $ 1,03

308,238 s 3.60 s,ss1,z.n s 136

4,274,807 $ .l,79

3,691,0S 1 $ l S4 -43,038 $ 8,86

SS,599 5 2.52 178,514 $ 1.1!3

2,278,399 $ l.S6 243,366 $ 1.16

5,SOO $ 332

404,372 s 162 S0,057 $ 1.31

Total Countries 51,019 $ 185,973,608 s 1.65 46,070 $ 170,728,657 $1.68

Source: U.S. Census Bureau Official Import Statistics for the foUowing HTS numbers: 8104.11.0000, 8104,19.0000, 8104.20,0000, and 810430.0000

Pure. Alloy, Scrap, and Granular Magnesium imports tor ('...onsumptmn

HTS Number.i: 8104, 11.0000, 8104, 19.0000, 8104 20,0000, and 8104,30,0000 (Quantity in Metric Tons, Landed Duty Paid Value in USD, AUV m S/Pound)

Quanbty

10,204

15,883 2,539 3,626

3,411

2~~Sl

909

5,696 702

2,123 163

1,490

156

1,ns 32-2

110

859

l $ s

() $ 35 s 39 $

$ $

$

2014

Value AUV

25,288,416 s 1,12

G9,812,502 $ 1,99

22,637,353 $ 4.04 7,179,874 $ 0,90

ll,085,826 $ 1.47 8,h69,826 $ Lfil

S,277,225 s 1.64 14,899,119 $ U9 4,13.1,012 $ 2.67

3,230,lW S 0.69 607,582 $ Lhl

4,415,553 $ 134

660,363 $ 1.92

61069,.763 $ l,5S 1,189,928 $ l.6S

320,305 $ 1.32

2,648,148 $ lAO

8,532 $ 4.83

SA87 $ 36.GC 114,967 $ 1.48 110,064 $ 1.29

7~401 $ 4.$4

--- ~$ ___ _

52,395 $ lll6,364,378 $ 1.61

Quantity

12,754

12,890

5.387 s 3,603 $ 2,841 $ 2,014 $

0 $ 1213 $ 4,274 5~

282 109 733

9 s 226 $ 863 $ 945

72 20

$ 310 $

182 s 90 $

$ $ $ $ $

2015

Value AUV

:n,521,897 $ 0, 9B-57,274,871 $ 2.01

28,433,577 $ 2.39 6,954,576 $ 0.88 S,592,956 $ 137

7,$2$,657 $ L70 5,652 $ 2$6,37

3, 799,$62 $ 1A2 10,437,434- $ l-011

3',276,886 $ 2,,$0

607,382 $ 0.98 520.851 $ 7.17

2,012,052 $ L.24 110,419 s 5.52

941,653 $ LB9

2,$28,071 s 1.33 3,34~,lf!S S 1J50

266,816 $ 1,69

26,069 s 0.59

878,190 $ 1.29 42&,376 $ l,07 276,TlO $ 140

77,()43 $ 3.31

--- .S'-----49,417 16$,739,995 $ 1.52

OU<Jnttty

12,195 11,335

G,$43 2,679

2,479

J,870 1,717

1,441 SM 738

6<3 f;31 $ 627

347

33&

334

311 s 65 $ so $ 42 $

45,286

$

$

$

2016

Va!uo AUV

29,8$0,108 $ Ll l

47,58G,445 $ 1.$!0

31,817,471 $ 4,134,S-89 s 0,70

6,730,303 s l.23

5,468,160 $ 1.33 4,141,734 $ 1.09

4,160,72'! $ UJ

l,943,604 $ 1.00 3,402,997 $ 2.09

961,355 $ 0.68 1,147,795 s Q,83

2,110,14:2: $ 1.53

1,150,770 $ 150

1,200,952 $ 1.61

1,203,589 s l.63 1,057,JSO $ 1.54

214,389 $ 1.49 411,9SS $ 3.72 110,.293 $ 1.19

28,401 $ 1.95

14,914 $ 1.21 26,622 s 2.47

148,874,511 $1.49

Januory. M•n:h 201G January - March 2017

Quanttty Value AUV

3,196

3,031 1,872

654

751

440

175 200

164 334 116 157 $ 39 s 72 86

135 44

25

$ $ s

ti,658 $

7,748,SSl S 1.10 14,114,146 s 2.1:

8,590,547 s 2.08 l,065,?.91 $ 0.74

1,973,760 s l.20 1,299,678 s 1.34

961,604 $ l.58 4lS,OS2 $ C.95

764,SSS $ 2.12 624,120 $ 0:85

448,423 S L15

4G2 .. 9Sfi $ 1.34

154,669 $ 1.81 261,857 $ 1.65

347,287 $ l.84

482,584 S U:i? 149,621 $ 1.$3 2os . .sn s 3.72

12,632 1.28

40,092,159 $1.SG

Ch.mntity Value AUV

2,197 $ 4,5:11,395: $ 0.93

2,893 $ 12,061,804 s 1.89

1,227 $ €1S'l1,80t $ 2.43

ou s l,543,-073 $ o.76 491 1,447,907 $ l..34

1,308 s 3.782,244 $ J.31 i:n s 32J~tn s 1.01 116 $ 581,.l.&8 $ 0.95 320 $ 729,423 $ 1.0:3

250 $ 1,100,490 $ 2J')0 '51 $. .256,244 s 1.20

21 119 250

SS $ 19 .$ 43 .$

20

3 $

s $

s s $ $

s $

17>,sss $ s:n 402,5$9 $ LS4

779,690 $ 1.4Z 175,287 $ 1.45

31,139 $ 1.91

158,825 $ 1.67

53,735 S L21 18,4GO $ 3,07

·-- ~$ ___ _ 10,648 34,754,147 $1"1S

EX IBIT 12

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

U.S. Imports of Pure, Alloy, and Granular Magnesium from China, 1989-2006 (Quantity in MT)

"

I "

..

..

" r .. "

"

..

"

0 "

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

- Pure Magnesium - • Alloy Magnesium ....,..,. .. Granular Magnesium

Source: USITC Dataweb, HTS Numbers 8104.11, 8104.19, and 8104.30.

EXHI IT 13

"' " "' e:; t:: i:::

"' ~ '- N

~ ~ Ui !;;: .:.:; a :;,,,.

~ vi

15 ::i t: <:: "'! <t

~

Keepjng Abreast of Developments in the global Mg industry ....

tu ... ~t ~,,tl!llllOO

ILUKA

~U<UH'l'.h'° ALCOA

em mm

non, ferrous metals research across range of base metals and Mn and mineral sands.

CM conducted a demand balance to

CM will be updating its Magnesium Market Outlook report later in 2017, lnc!uding ;i comprehensive revlew of Mg ln automotive app!irntions.

II)

> ro ~ ro w ~ ro I-> w ~

c 0

·.p

' ' ' rn ~

c I I tu ' I 1 I tfl Cl) I • I ....

0... I I I

I I j

I J

Global Mg Industry - Data Sources

• Global Mg industry data compiled by CM from many sources.

CM has been collecting and analysing Mg industry data for over 15 years.

CMs databases are continually updated and reviewed.

CM data mostly acquired 'bottom up', and compared with other data sets (where available).

• Chinese industry data varies greatly between sources. As well as our own) we use

- CNIA

CMA

• No two data sets are the same

CM's own data forms the basis for the analysis in this presentation

Key Takeaways

2016 global primary Mg consumption up 2% y-o-y to 843 kt, aluminium

2016 globnl Mg supply up 4% y-o-y to 878 kt.

up die

Supply outside China declined by 10 down to 135kt in 2016, due to decline :it Dead Sea

met 1n BraziL

China contributing 743 kt (8S% of global supply), up from 83% in 2015.

metal reduction up 14%_

in and lower

A oroiect with total capacity of 50kt/yr in India

Shaanxi remains the largest Mg producing province in

Private. is approved and Phase I will cornmence in Nov 2018.

reached 431 kt in up from 415 kt in 2015.

Chinese primary Mg utilization (of active estimated at 59% in than 58% average in 2015.

China's 2016 do111estic Mg consumption at 352 kt of total China supply), up 13% y-oy.

Revival in titanium production combined with a trend toward l1ghtwe1ghting

but a we;ik semi-coke market in China pushed costs

China's 2016 net exports estimated :it412 kt, up 4% y-o-y (397 kt in 2015).

The FOB pnce of primary in China increased to US$2,575/t in 2016

stronger demand.

of orimarv M~ 1n

use waste gas from serni·coke process as

Jan. to driven by costs and

Steady 2-Year decline in Mg Prices ... rebound in 2016

• In 2016, pdmarv Mg prices increased steadily in China .. due to higher Chinese domestic demand and (raw material and lntematiomii magnesium orices also tracked

continued to produce and build inventories rather than sell at as toss. High cost pressure to close. Domestic magnesi

fluctuated but began to climb

2016, as demand grew.

• In December 2.016, some producers were forced to sell on the back of prt>ssure frorn mountmg inventories. This resulted in

a rapid droo in magnesium prices into Ql 2017.

. More recently, prices have rebounded, as stocks have been cleared and demand

remains strong

2.7®

i l.l\YJ

~ ~ 2 l~to.;: !!

f t.

l,~

;..no ~ ~ . . . . ~ . . . ~ : ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ - ~ ; ~ ~ ~ = ~ ~ ~ ii-iiiiijii1i•tbJ~iJJB I! ~tf$ 2 1J!J -~ ~ -~ ""' ~ "::} """ < ,,._ n ;,;. :Pl;

Estimated Industry Utilization Levels in China, 2016

Z: ·u ro 0. ro u

ro ..... 0 ......

'4-0 c: 0

·,µ m

.t::! ·.µ =>

NP! Mg lv1n Cement Al

" Despitr1 China's determination to cut overcapacity and its strong moves in sector, uti!lsations in many other industries remam extremely low.

• in 2016. Chinese primary Mg indu!>try utilization estimated by CM at 59% (of active

Ti sponge

APT

in the steel and rnal

"'C c ttl

E w 0 ........ > ...... Q.. c.. :J vi CD ~ -m ..c 0 -t.!J

c 0

·.p f ro

~ c I I I I OJ I I I I Vl (]) I I I i "-

0... I I I I I I I I I I i I I I I I

Global Primary Mg Supply (kt Mg)

2001

2011

2016

China% -,Gioba!

2016 Global pnmary Mg supply estimated at 878 kt, 4% increase from 2015 (845

China's 2016 Mg supply estimated at 7 43 kt, accounting for 85% of global supply.

ROW producers - USA at 8%, Israel 3%, Russia at 2%, Brazil 1 % and Others at 1 %.

CAGR 2006 to 2016 estimated at 4.9%.

Primary Mg Global Supply Demand Balance 2000 to 2016 (kt Mg)

Tota! Balance

-Total Demand

100

0 -'--'~---

2000 2002 2004 2006 2008 2010 2.012 2014 2016e

In 2016, the global primary Mg industry recorded an estimated net surplus of 3Skr

2015 but lower than the previous five years.

400

350

300

250 J2 .... s

200 "' s <I.I

150 ~ ro

-m 100 co

so

0

-50

than

Global Dernand by Sector - 2000 to 2016

• 2016 global prlmarv demand

increased slightly, by 2% y-o-y to

843 kt.

. Al alloving and die-casting

remained tht? two maior Mg

sectors in 2016,

estimated at 37% and 32% {auto

28% plus other respectiveb;.

">-'-.

~ -0

"' "' E "' "' -;;

-"' JI

"'

10.C:.;J --

-"""""·~·...,'

2[(;

,,,, ... --­.,,,... ....

Global Supply If"" .-1' ,

I

..,.4',,~,..-

OtheT

~ Castlllg-mher

1)1.Jil~·~

Global Dernand by Sector,. 2016 (%)

Auto parts 3C products Aerospace

Aerospace Auto parts Al extrusion .----_.....,

843 kt

Crude steel

etaJr~uetion Tl Sponge 10%

Nodular

Chinese Mg Consumption By Industry Sector 2015 2016 (kt)

China's 2016 Mg consumption estimated at

351.9 kt, up bv 13% y·o·y.

Aluminium alloy sector grew significantly,

up by 9.7%.

Mg consumption m the die casting section

reached 104.4 kt in 2016, up by 16%,

driven by lightweishting applications the f transport sector, as well as 3C & aerospace

applications.

Sponge Ti recovered in

production lncre;:ised by 39% and the

market is still reportedly in short

Mg consumption in metal reduction sector

reached 59.5 kt

Consumption of Mg in iron & steel industry

was flat over the year.

II Aluminium Alloying f,; Iron & Steel Die Casting· Auto Dfe Casting· Other Metal Reduction Other

~ ,.. "'" ,,_

312.1

23.3

47.2

24.3

65.8

22(i "~~*"'"""""' .. "'"'"""

0 !'' ____ __,

20:5

.. .. "" ....... .351..9 •.•• .. -· ... . - . .... -- -lt~ ..,,. . -.

.,,,,,,,,.. .. -.--r.-:'. • - . - • - • - • - • . . . ~ ~

,._ .. _ .. - .. -· .. ·..;. .. ~::...:; ...

____ .. _ .. _

" ~ .. :...: : • -~ '* .:..,:,~ : ,,,_ .:...~: ~...:.." ,,: ;...i ..

25.9

59.S

28.2

76.2

Mg- potential lightweight structural material

• Mg alloy is environmentally structural material.

lightweight

• ln response to tightening emissions standards and climate change policy, the world's major countries are developing their 2020 or longer-term passenger car

fuel consumption standards and regulations, which put forward more

emissions targets.

• In the Chinese government set a target of achievinc an average fuel consumption of SL/100Km {passenger by 2020.

• The next few ye;:irs will see a continuation of more opportunities for the development at lightweight structural materials.

11

10 ....................... ,. ..

0 J

8

7

6

5 (lJ

2 4

3

2 2005 2010

·----,--2015 2020 2025

Policy Support for Magnesium in the 13th Five-year Plan {2016 to 2020)

Oct 2016, China's MllT issued its "Non-ferrous Metal Industry Development Plan (2016-2020)", proposing to focus on the development of high·performance light alloy materials.

~ocus on the industrial & manutacturn and volume air electrode

of and hi!1'h oreclsion materials of magnesium

components, 150 kt of in the field of trunsporta!:ion 2020

/\l.iiT

wide sheet air cell focus of non·forrmi~

new em?rgy

materials

Index 2015 Tar:get of202.0

.;500

Electrotvtic

metal ma:erials

> -Q.. Q. :J

V"j

l1' ... m c ·-..c u

c

' ' I I I I I f J I t I f I I I

' I a I I I

China's Prirnary Mg Supp

Others 20%

368 kt

Shanxi 653'

of integrated

Shanxi is rhe second

Shamd 41%

by Province - 2016

743 kt

due to strong demamL Thanks to relative low costs and benefits producer in China in 2016.

up slirrhtlv in 2016 to 19ll kt.

ic.w loca'

2016 - a year of change, but little improvement

2015 Production kt

415 ''.!"..~;,;; 0)'.'¥iw\;'.i,;;·:,;;/; ;)~\;;&.,'.;•.,; ' ;;;;;;,;; ;;'., ;;;',,,,;;;.'.;'.'.; \l;')'e;) '.));,))'.>; ;;;, ,)' Shaanxi

186

At the beginning of 2016, the domestic magnesium market remained flat, many smelters kept their output stable; around mid-year, output began to increase as market confidence returned; in Q4, the market was hit by soaring coal prices, as coal supplies

Shaanxl remains largest Mg producer

in China despite limited growth in output due to declining profit margins driven by worsening conditions in the semi-coke market

Shanxi

~ Ningxia

23 ~ IM

~ Xinjiang

8 ii> Qinghai 5

2 i Henan 0

8 -i.' Others 8

50

27

2016

194

26.1% share of the domestic output, _rate in Sh<.mxi remain low

due to the relatively high costs and strict . ..,..,,~..,r•~ the output in

all grew

thanks to relative low local coal Henan smelters exited the market

on high costs.

China's Primary Mg Supp

We estimate around 200 kt/yr Pidgeon

capacity is planned and 100 kt/yr

electrolytic capacity is testing

produc.i:ion line. Most of the Pidgeon

capacity is in early waiting a

higher odce to enter the market.

Shaanxi

capacity of 18 ktpy.

& pansions in 2016

t.llOO

f 1 -oo .,,.,. • . • ;c ~.J _.,. __________ ,,,, .. _________ ... ~·'"'-"'"'""~~~--.~ .. -_.. •• _,.*""'""''"'-'II"'"'

151)(!

0 -~~· ~:£ 11?"",rir~:rJf ~1fiJ :~Jtt0?.'Xl!~Z-~i~mc~1f*:.mt:n~Ainli>1D1tl111'0U:ron:r:>t.'4}:)~!~r

-i'rt>duci<l<\ kti.,,,C>!'<-it-• tna::tweC.;iri.lO:ty -"-urtlt~ho,.~Qf~C:Jp~ ~

~ 5-0% ,!}

;;;: :;;;

Qinghai Salt Lake Magnesium Integration Project Developrnent

Loaded commissioning at eiectro1y1 cells completed, with production of

Bus bars ~

su!Jstation for Mg produr.tion

Global Mg Cash Cost Cu

• Shaanxi producers remain the lowest cash cost producers in the world.

• Higher costs ln Mg smelters using semi-coke \ivaste gas, but offset bv robust demand and rising prices.

• Shanxi smelters are affected by high coai prices. Some Shanxi smelters have opted for high-end Mg products and remain operational,

aiming to improve quality and competiveness but profit margins are thin .

.. With rising coal and FeSi prices, primary Mg

producers in IM, Ningxia and Xinjiang were operating at breakeven with llmlted margins.

• Non-China producer costs remained stable although output declined.

2016 by Region {US$/t)

4,000

Non- Chrna

2,000 • ' ' _, -... ~ w :::>

0 0 435

Cumulative Production '000 tonnes

'181

..0 91 '"5

L '& ~ 0

870

Cost Structure for China's Primary Mg Produce (2016)

FeSi is the largest cost input for primary Mg production using the Pidgeon Process.

FeSi price is therefore a critical factor for primary

production.

In 2016, Fe Si prices have been weighing on Mg smelters.

Labour 15%

is another important factor in the cost structure. In fl2 2016, coal

reduced the smelters.

Skilled workers could lower the cost, and workers' salarv are almost the same as fn 2015.

in Chin<! n:nt retorts, a

few have their own retort plants The: cost of retorts remained stable.

Dolomite market is also stable.

Other costs account for about 4% of the total.

The "2+26 11 Cities Environmental Protection Program

surrounding areas air program 2017",

and its surrounding 26 cities, referred to as "2+ 26" cl ties.

main producing areas of primary Mg· Baotou and Ninf!xia are not within the

• The governance focus of the work program does not include magnesium smelting

• April 26, MEP listed the supervisor of the "two seepage pollution problem, requiring all acid-related enterprises in

and l1:s surrounding areas to suspend including Tianjin port Mg Ingot pickling business, limitina the export of Mg, weakening the already gloomy market.

0 Major primary Mg producing 8 "2+26" - 2 municipalities

''2+26" - 26 cities

vi w y ...... ....

Q..

m u ·-OJ ....

1.- 0 :J

...., +-I (.11

u ·-:J :c to-

4-1 V"')

c 0

·.µ

' rn ' ' *-1 c ill Vl ill !....

0..

Higher prices in the US1 driven by anti-dumping duti (US$/t,

7500

6000

4500

~ -<I). <,I')

=> 3000

1500

0 M N "' "

,,, "' ... ai "' :;:; r< N "' 0 9 9 C( 0 '9 '9 9 "? ~ r< ,..

c " " c C: c: c: c: "' 6 c " ~ .!:( '" .!!; ,,, .!:( ~ .!!! ~ '"' ~ :!! .!< -

Due to anti-dumpling duties, the US ma Inly imports primary Mg from non·China to higher prices.

USA

EU China

~ "' w "" ~i: c c 6 .!:; ~ ti! ~

costs lead

.)

•

•

Mg Prices vs FeSi Prices

FeSi prices trended up further in 2016, exerting significant pressure on magnesium prices.

By end-2016 magnesium prices tracked down with lower FeSi prices but also some de·stocking

5 s

.i,500

3.000

1.soo Mg

Q

t.tg · Otl.~;i il'it'~111 ~~~a~ rtu\'fl

Mg/ Al Price Ratio - rr1alntarning the long-run average

0 ·r. : ~ a.

6.0

4.0

i 20

o.o ,_ <:;>

"' ~ 9 9 0

c t: c ~ !! .!'.!

-W -~(.hirrn USA

<rl "' "' ""' VI '>£':

"' - ,.., i:. .: "' c

!i "' ~ ~ ~ .!l !'!!

.... ... c ,;;~

Both primary Al prices and primary Mg prices climbed during 2016. The Mg/ Al price ratio remained steady at approximately Ll during 2016.

~ 0 0 -....., ::s 0 c--

OJ !..... ::1

... -1--J

lJ')

u

::s -0 c:

:.J !..... +-' Vl c 0 ·p ro ' ~ c t I OJ V'l I ~ . I Q) I i.... a.. t i

! i I I

I I i I I I

Industry Outlook - lobal Supply (kt/yr)

• Ctv1 forecasts Dy end of

global primary Mg supply at around 1.57 MIP1

(, based on CAGR of 6.0% (2016 to

2026)

• Chlria is forecast to continue as dominant supplier estimated at 84% of

• At least one new n1nr+rr1i-

and more Pidgeon proji:ects outside China are forecast to be put into

;:iroduction ovi::r the outlook oenod, maintaining the

l>l) CAGR 2 1,000 ~ SyrCAGR

F I ~3.2% i

81% 85%

68%

0 2006 2011 2016

Supply Current ROW Capacity - Future ROW

Forecast

80%

2021

84%

2026 China

Industry Outlook - Global Demand by Region (kt/yr)

• CM forecasts global primary Mg demand at 6.4% 10yr CAGR

(2016 to 2026).

• China's domestic demand for primary Mg remains robust, mainly to feed its domestic Al, die­casting industries1

with 10yr CAGR estimated at 8.3%.

2,000

!>I)

:?! 1,000 .!;!

0

Global supply

~NA

EU

Japan

China

Rest of World

2001 2006 2011

Forecast

2016 2021 2026

0

..

0

Industry Outlook- Global Demand by Major Market Sector (kt/yr)

CM forecasts the lOyr CAGR of Mg demand from auto industry (die casting) to be at 10.3%.

Al alloying 4.7% 10yr

CAGR.

Steel industry flat over the outlook period, as China housing sector growth

bO

~ 1,000 ~

slows. o

Global

Ii Aluminium

Iron & Steel

Mewl Reduction

Die Casting Auto

Die Castine; - Oi:her

2001 2006

Forecast

2011 2016 2021 2026

Surr1mary - a flat year, but overcapacity rernains a chronic problen1

• 2016 was a flat year - global primary Mg demand up 2%.

• Despite a fall in non-China supply, increments of supply were greater than that in demand.

• China output stable as a percentage of total (85%).

• Shaanxi continues as the major global primary Mg production hub.

• Chinese utilization sitting at around 59%, up marginally in 2016, overcapacity still prominent.

• Non-China suppliers 'doing it tough' and either declined slightly or reported a flat output

• Mg alloy applications for lightweighting, together with a revival ln Ti production, stimulated

consumption of primary Mg in China; prices were boosted by higher demand and rising costs.

• Global primary Mg industry experiencing a recovery and there are encouraging signs for 2017 - a

year of hope.

EX IBIT 14

U.S. Prices for Pure Magnesium: Platts MW U.S. Dealer Import

(in cents/lb)

300 ' -·~~~--~~~~-~~~~

250 ·-4---". ·-----·------------------·

200 +-~~~~~~~~~~~~~~-""""''!--~~~~~~~·~~~~~~~~~·

150 .+------- --· ----------~""""~--:--

100 ----------

so - ·--------------------·--------------------·--------------------------~---------·---

0 ~;~~~-,-~~~.,.--.~~_,_~~~~~~~,--~~-.-~~~~·

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

-MW U.S. Dealer Import

Pure MaQnesium MW U.S. Dealer lmeort

Low High Averaoe

1-Jan-10 220 240 230 8-Jan-10 220 240 230

15-Jan-1 O 220 240 230 22-Jan-1 O 230 250 240 29-Jan-10 240 260 250 5-Feb-10 250 270 260

12-Feb-10 250 270 260 19-Feb-10 240 260 250 26-Feb-10 240 260 250

5-Mar-1 O 240 260 250 12-Mar-10 230 250 240 19-Mar-10 230 250 240 26-Mar-10 230 250 240

2-Apr-10 230 250 240 9-Apr-10 230 250 240

16-Apr-10 230 250 240 23-Apr-10 230 250 240 30-Apr-10 230 250 240 7-May-10 230 250 240

14-May-10 230 250 240 21-May-10 230 250 240 28-May-10 230 250 240

4-Jun-10 230 250 240 11-Jun-1 o 230 250 240 18-Jun-10 230 250 240 25-Jun-10 230 250 240

2-Jul-10 230 250 240 9-Jul-10 230 250 240

16-Jul-10 230 250 240 23-Jul-10 230 250 240 30-Jul-10 240 250 245 6-Aug-10 240 250 245

13-Aug-10 240 250 245 20-Aug-10 250 260 255 27-Aug-10 250 260 255 3-Sep-10 250 260 255

10-Sep-10 250 260 255 17-Sep-10 250 260 255 24-Sep-10 250 260 255

1-0ct-10 250 260 255 8-0ct-10 245 260 252.5

15-0ct-10 245 260 252.5 22-0ct-10 235 250 242.5 29-0ct-10 235 250 242.5 5-Nov-1 O 230 250 240

12-Nov-10 230 250 240 19-Nov-10 230 250 240 26-Nov-10 225 240 232.5

3-Dec-10 225 240 232.5 1 O-Dec-10 225 240 232.5 17-Dec-10 225 240 232.5 24-Dec-10 225 240 232.5 31-Dec-10 225 240 232.5

7-Jan-11 225 240 232.5 14-Jan-11 225 240 232.5 21-Jan-11 225 240 232.5 28-Jan-11 225 235 230

Page 2 of 8

Pure Ma1:inesium MW U.S. Dealer lmEort

Low High Average

4-Feb-11 225 235 230 11-Feb-11 225 235 230 18-Feb-11 235 245 240 25-Feb-11 235 245 240

4-Mar-11 235 245 240 11-Mar-11 235 245 240 18-Mar-11 235 245 240 25-Mar-11 235 245 240

1-Apr-11 230 245 237.5 8-Apr-11 230 240 235

15-Apr-11 230 240 235 22-Apr-11 230 240 235 29-Apr-11 230 240 235 6-May-11 230 240 235

13-May-11 230 240 235 20-May-11 230 240 235 27-May-11 230 240 235

3-Jun-11 230 240 235 10-Jun-11 225 240 232.5 17-Jun-11 225 240 232.5 24-Jun-11 225 240 232.5

1-Jul-11 225 240 232.5 8-Jul-11 225 240 232.5

15-Jul-11 225 240 232.5 22-Jul-11 225 240 232.5 29-Jul-11 222 235 228.5 5-Aug-11 222 235 228.5

12-Aug-11 222 235 228.5 19-Aug-11 222 235 228.5 26-Aug-11 222 235 228.5

2-Sep-11 222 235 228.5 9-Sep-11 222 235 228.5

16-Sep-11 222 235 228.5 23-Sep-11 222 235 228.5 30-Sep-11 222 235 228.5

7-0ct-11 222 235 228.5 14-0ct-11 222 235 228.5 21-0ct-11 220 235 227.5 28-0ct-11 220 235 227.5 4-Nov-11 212 225 218.5

11-Nov-11 212 225 218 5 18-Nov-11 212 225 218.5 25-Nov-11 212 225 218.5

2-Dec-11 212 225 218.5 9-Dec-11 205 225 215

16-Dec-11 205 225 215 23-Dec-11 205 215 210 30-Dec-11 205 215 210

6-Jan-12 205 215 210 13-Jan-12 205 212 208.5 20-Jan-12 205 215 210 27-Jan-12 205 215 210 3-Feb-12 205 215 210

10-Feb-12 205 215 210 17-Feb-12 205 215 210 24-Feb-12 205 215 210

2-Mar-12 203 212 207.5

Page 3 of 8

Pure Magnesium MW U .s. Dealer lmEort

Low High Average

9-Mar-12 203 212 207.5 16-Mar-12 203 212 207.5 23-Mar-12 200 210 205 30-Mar-12 200 210 205

6-Apr-12 200 210 205 13-Apr-12 200 210 205 20-Apr-12 200 210 205 27-Apr-12 200 205 202.5 4-May-12 200 205 202.5

11-May-12 200 205 202.5 18-May-12 200 205 202.5 25-May-12 198 205 201.5

1-Jun-12 198 204 201 8-Jun-12 198 204 201

15-Jun-12 198 202 200 22-Jun-12 200 202 201 29-Jun-12 200 202 201

6-Jul-12 200 202 201 13-Jul-12 190 199 194.5 20-Jul-12 190 199 194.5 27-Jul-12 190 199 194.5 3-Aug-12 190 199 194.5

10-Aug-12 190 200 195 17-Aug-12 190 200 195 24-Aug-12 190 200 195 31-Aug-12 190 200 195

7-Sep-12 190 200 195 14-Sep-12 190 200 195 21-Sep-12 190 200 195 28-Sep-12 190 200 195

5-0ct-12 190 200 195 12-0cl-12 190 200 195 19-0ct-12 190 200 195 26-0ct-12 190 200 195 2-Nov-12 190 200 195 9-Nov-12 190 200 195

16-Nov-12 190 200 195 23-Nov-12 190 200 195 30-Nov-12 190 200 195 7-Dec-12 190 200 195

14-Dec-12 190 200 195 21-Dec-12 190 200 195 28-Dec-12 190 200 195

4-Jan-13 190 200 195 11-Jan-13 190 200 195 18-Jan-13 190 200 195 25-Jan-13 190 199 194.5 1-Feb-13 190 199 194.5 8-Feb-13 190 199 194.5

15-Feb-13 190 199 194.5 22-Feb-13 190 199 194.5

1-Mar-13 190 196 193 8-Mar-13 190 196 193

15-Mar-13 190 196 193 22-Mar-13 190 196 193 29-Mar-13 190 196 193

5-Apr-13 188 196 192

Page 4 of 8

Pure Ma9neslum MW U.S. Dealer tmeort

Low High Average

12-Apr-13 186 196 191 19-Apr-13 186 196 191 26-Apr-13 186 196 191 3-May-13 186 196 191

10-May-13 186 193 189.5 17-May-13 185 190 187.5 24-May-13 185 190 187.5 31-May-13 185 190 187.5

7-Jun-13 185 190 187.5 14-Jun-13 185 190 187.5 21-Jun-13 183 188 185.5 28-Jun-13 183 188 185.5

5-Jul-13 183 188 185.5 12-Jul-13 185 195 190 19-Jul-13 185 195 190 26-Jul-13 185 195 190 2-Aug-13 185 195 190 9-Aug-13 185 195 190

16-Aug-13 185 195 190 23-Aug-13 185 195 190 30-Aug-13 185 195 190

6-Sep-13 185 190 187.5 13-Sep-13 185 190 187.5 20-Sep-13 185 190 187.5 27-Sep-13 185 195 190

4-0ct-13 185 195 190 11-0ct-13 185 195 190 18-0ct-13 190 195 192.5 25-0ct-13 190 195 192.5 1-Nov-13 190 195 192.5 8-Nov-13 190 195 192.5

15-Nov-13 190 195 192.5 22-Nov-13 190 195 192.5 29-Nov-13 190 195 192.5

6-Dec-13 190 195 192.5 13-Dec-13 190 195 192.5 20-Dec-13 190 195 192.5 27-Dec-13 190 195 192.5

3-Jan-14 190 195 192.5 10-Jan-14 190 195 192.5 17-Jan-14 185 195 190 24-Jan-14 190 195 192.5 31-Jan-14 190 195 192.5 7-Feb-14 190 195 192.5

14-Feb-14 190 195 192.5 21-Feb-14 185 193 189 28-Feb-14 185 193 189

7-Mar-14 185 193 189 14-Mar-14 182 193 187.5 21-Mar-14 182 193 187.5 28-Mar-14 182 193 187.5

4-Apr-14 182 193 187.5 11-Apr-14 182 193 187.5 18-Apr-14 182 193 187.5 25-Apr-14 182 192 187 2-May-14 182 192 187 9-May-14 182 192 187

Page 5 of 8

Pure Magnesium MW U.S. Dealer lmeort

Low High Average

16-May-14 182 192 187 23-May-14 182 192 187 30-May-14 185 192 188.5

6-Jun-14 185 192 188.5 13-Jun-14 185 192 188.5 20-Jun-14 186 191 188.5 27-Jun-14 186 191 188.5

4-Jul-14 186 192 189 11-Jul-14 186 192 189 18-Jul-14 186 192 189 25-Jul-14 186 191 188.5 1-Aug-14 186 191 188.5 8-Aug-14 186 191 188.5

15-Aug-14 186 191 188.5 22-Aug-14 186 191 188.5 29-Aug-14 186 191 188.5

5-Sep-14 186 191 188.5 12-Sep-14 186 191 188.5 19-Sep-14 186 191 188.5 26-Sep-14 186 191 188.5

3-0ct-14 186 191 188.5 10-0ct-14 188 193 190.5 17-0ct-14 188 193 190.5 24-0ct-14 188 193 190.5 31-0ct-14 188 191 189.5 7-Nov-14 185 190 187.5

14-Nov-14 185 188 186.5 21-Nov-14 185 188 186.5 28-Nov-14 185 188 186.5

5-Dec-14 183 188 185.5 12-Dec-14 184 189 186.5 19-Dec-14 184 189 186.5 26-Dec-14 184 189 186.5

2-Jan-15 183 189 186 9-Jan-15 183 189 186

16-Jan-15 183 189 186 23-Jan-15 183 189 186 30-Jan-15 181 185 183 6-Feb-15 181 185 183

13-Feb-15 181 185 183 20-Feb-15 181 185 183 27-Feb-15 180 185 182.5

6-Mar-15 180 185 182.5 13-Mar-15 180 185 182.5 20-Mar-15 180 185 182.5 27-Mar-15 180 185 182.5

3-Apr-15 180 185 182.5 10-Apr-15 180 185 182.5 17-Apr-15 178 185 181.5 24-Apr-15 178 185 181.5 1-May-15 178 185 181.5 8-May-15 176 185 180.5

15-May-15 176 185 180.5 22-May-15 177 185 181 29-May-15 177 185 181

5-Jun-15 177 185 181 12-Jun-15 177 185 181

Page 6 of 8

Pure Ma9nesium MW U.S. Dealer Import

Low High Average

19-Jun-15 179 185 182 26-Jun-15 179 185 182

3-Jul-15 179 185 182 1 O-Jul-15 179 185 182 17-Jul-15 179 185 182 24-Jul-15 175 180 177.5 31-Jul-15 175 180 177.5 7-Aug-15 175 180 177.5

14-Aug-15 170 180 175 21-Aug-15 170 180 175 28-Aug-15 175 180 177.5

4-Sep-15 175 180 177.5 11-Sep-15 172 178 175 18-Sep-15 172 178 175 25-Sep-15 172 175 173.5

2-0ct-15 172 175 173.5 9-0ct-15 172 175 173.5

16-0ct-15 170 175 172.5 23-0ct-15 170 175 172.5 30-0ct-15 170 175 172.5 6-Nov-15 170 175 172.5

13-Nov-15 170 175 172.5 20-Nov-15 170 175 172.5 27-Nov-15 170 175 172.5

4-Dec-15 168 173 170.5 11-Dec-15 165 172 168.5 18-Dec-15 165 172 168.5 25-Dec-15 168 172 170

1-Jan-16 168 172 170 8-Jan-16 168 172 170

15-Jan-16 165 170 167.5 22-Jan-16 165 170 167.5 29-Jan-16 165 170 167.5

5-Feb-16 165 170 167.5 12-Feb-16 160 167 163.5 19-Feb-16 160 165 162.5 26-Feb-16 160 165 162.5

4-Mar-16 160 165 162.5 11-Mar-16 160 165 162.5 18-Mar-16 160 164 162 25-Mar-16 160 164 162

1-Apr-16 160 164 162 8-Apr-16 160 163 161.5

15-Apr-16 160 163 161.5 22-Apr-16 160 163 161.5 29-Apr-16 160 163 161.5 6-May-16 160 163 161.5

13-May-16 159 162 160.5 20-May-16 159 162 160.5 27-May-16 158 161 159.5

3-Jun-16 158 161 159.5 1 O-Jun-16 158 161 159.5 17-Jun-16 152 158 155 24-Jun-16 152 158 155

1-Jul-16 152 158 155 8-Jul-16 152 158 155

15-Jul-16 150 155 152.5

Page 7 of 8

Pure Ma9nesium MW U.S. Dealer lmeort

Low Hiqh Average

22-Jul-i6 150 155 152.5 29-Jul-16 150 155 152.5 5-Aug-16 150 155 152.5

12-Aug-16 150 155 152.5 19-Aug-16 150 155 152.5 26-Aug-16 149 153 151 2-Sep-16 149 153 151 9-Sep-16 149 153 151

16-Sep-16 149 153 151 23-Sep-16 149 153 151 30-Sep-16 149 153 151

7-0ct-16 145 152 148.5 14-0ct-16 145 152 148.5 21-0ct-16 145 152 148.5 28-0ct-16 145 152 148.5 4-Nov-16 145 152 148.5

11-Nov-16 145 152 148.5 18-Nov-16 145 155 150 25-Nov-16 145 155 150 2-Dec-16 145 155 150

9-Dec-16 145 155 150 16-Dec-16 147 155 151 23-Dec-16 147 155 151 30-Dec-16 147 155 151

6-Jan-17 148 155 151.5 13-Jan-17 148 155 151.5 20-Jan-17 148 155 151.5 27-Jan-17 146 154 150 3-Feb-17 146 154 150

10-Feb-17 146 154 150 17-Feb-17 146 154 150 24-Feb-17 146 154 150

3-Mar-17 145 152 148.5 10-Mar-17 145 152 148.5 17-Mar-17 145 152 148.5 24-Mar-17 145 150 147.5 31-Mar-17 145 150 147.5

7-Apr-17 145 150 147.5 14-Apr-17 145 150 147.5 21-Apr-17 143 148 145.5

28-Apr-17 143 148 145.5 5-May-17 143 148 145.5

12-May-17 145 149 147 19-May-17 145 149 147 26-May-17 145 149 147

2-Jun-17 145 149 147

Page 8 of 8

EXHIBIT 15

''

Qinghai Salt Lake Industry Co. Ltd.

-1 -

Shijun Wang Guoli Yu

21May2017

• N

Qinghai Salt Lake Mg integrated project targets 1 OOkmt annual capacity, with MgCl2 as raw material and using advanced process based on Norsk Hydro's proven technology.

-3-

+J i... ro ..c u $ 0

ti.': IJ) V')

OJ u 0 1.-

c. c: 0 ·-""" ro """' bO <lJ +.* c:

:l -I/) Q) c tlO ro 2

Gasify ·~••'! EDC

Coke oven gas HCL

Using waste brines from KCI fertilizer production as raw material, applying Norsk Hydro proven electrolysis technology with additional breaking through and optimization on brine purification and dehydration processes. 100kmt production facility has been established for the first stage, and the second stage expansion has been started.

-4-

Using Hydro-Wind-Solar mixed green power and waster brine rich of MgCl2 as raw

material, Qinghai Salt Lake Mg project is superior to traditional Pidgeon process using high carbon containing dolomite or magnesite as raw material, in terms of

environmental friendliness.

-5-

Qinghai Salt Lake Mg electrolysis process applies the most environmental friendly

design and technologies. It produces and offers the "Greenest" Mg in the world

and helps downstream users to develop various GREEN solutions.

-6-

..

On 22nd Aug. 2016, President Xi visited the

Qinghai Salt Lake project. He highly appreciated

the Salt Lake resources as well as the integrated

exploration design and process.

- 7 -

Qinghai Salt Lake will be committed to comprehensive development and

utilization of salt lake resources and construction of integrated production

chain, aiming to build an ecological Mg-Li-K park and offering low carbon emission green raw materials to the market.

Sodium salt Potassium salt

~ ~ ~

Brine mining Brine transportation Sodium salt pond High Mg waste brine

Mg alloy ingot Mg alloy casting Electrolysis Dehydration

-8-

The latest development shows hydro-solar­

wind green power accounts for around

90% in Qinghai's local power production.

-9-

Hydro-Solar-Wind "'90%

'

{

/11) Origin of 3 major Chinese rivers (Yangtze, Yellow and

Canglan), best Hydro power resources;

2) Good solar resources in Chaidam Basin area. Millions

~jkV solar power stations have been built in Golmud area.

3) Qinghai 330KV, 750KV power grid and local solar

power base have formed a strong power grid, wh1ch

ensures the power supply of the Mg electrolysis plant.

1i.t:™11=f~---~%tt* • :S:ttai~li2 ·~~~um

Qinghai Salt Lake is planning to integrate the local photovoltaic power, photo­

thermal power and wind power in Golmud region to set up company scale

micro-grid. With technology innovation, to achieve direct application of solar

power to the electrolysis DC power supply system, so as to secure a powerful,

stable and reliable power supply.

- 11 -

·1) Proven technology with optimization, by-product Cl2 as raw material of PVC

production;

2) No need exploring and mining for raw materials, no large amount of wastes

and dusts produced in the production phase. Minor amount of waste water

containing chlorine will not cause negative effect to Salt Lake.

- 12 -

3) Pneumatic conveying system is applied to realize MgCl2 automatic feeding

for large-scale magnesium electrolysis cell.

4) Advanced protecticve gas system, minimize the negative impact to the

working condition as well as the environment.

-13 -

> ; (.) Q) I-

-a (/) >-. 0

C'O

E ::I (/) Q) c O> C'O

::? (/)

::I 0

·;:: C'O > Q) I

'<t (.) ~

::I ' -a 0 I-0. 0 ........ (.) Q) ...... c 0 O> C'O

::? ..r:: ....... ·~ c 0

':.+:i C'O I-Q) 0. 0 0 ()

............ l{)

6) Low carbon emission. No carbon containing raw material, no carbon producing

electrolysis process and green energy with further improvement by direct

applying solar power.

- 15 -

The construction has been finished, and whole process commissioning completed, trial load of dehydrated MgCl2, pure Mg, Mg alloy as well as Mg diecast part had been produced. a On 31 Dec. 2016, MgCl2 dehydration process finished commission; a In Jan. 2017, pure Mg was produced. 30kmt Mg capacity is expected to reach

in 2017, together with continuous equipment optimization.

-16-

[] Brine purification: Commissioning at the end of 2015 at achieved designed capacity. S04 = <1 Sppm, B complete removal;

lJ Dehydration unit: Commissioning whole process at the end of 2016. MgCl2 content >96o/o, Mg(OH)CI <0.4%.

lJ Electrolysis cell: Commissioning on June 2016. Trial production continues with 2-3mt pure Mg output. More cells are in preparation for operation.

-17-

i ... Ao .. ci{JJ.~.rY.f?.<;.i ~i!ie,~ .. J ~¢f~~~L~~~~~~iif¥i1~%f~¥14vm.&:~~;~1Tu:~t~0kk~:~~\~~ik~(~~~~

D Sodium carbonate: Commissioning in 2014, 180kmt and over 300kmt production achieved in 2015 and 2016 respectively.

D PVC: Commissioning in 2016, and now in steady operation.

D Coke: Commissioning in 2016, and now in steady operation.

D DMTO and PP: Construction finished and commissioning planned in 2017.

D Methyl alcohol: Construction finished in 2016 and in commissioning.

D Potash: Commissioning in 2016 and now in optimization.

D Coal washing: Commissioning in 2015,_and now in s!§_§_dy gperation.

- 18 -

CJ With innovation-driven strategy, to develop ecological friendly Mg-Li-K park;

CJ Preparation of second stage expansion at proper time for million int capacity, to lead the Mg industry;

CJ To build world class Mg material base, China Li metal base and world class K product base.

-19-

1. China's "Made in China 2025" Strategy defines the lightweight of new

energy cars as one of the key tasks. ~~~~~ l:P ~ if_ilj j§

-20-

2. Lightweight demand of automotive industry welcomes Qinghai Salt

lake green Magnesium.

Chinese manufacturing industry is speeding up the development of low carbon

green process and technologies. According to China's Ministry of Industry's requirement, Green Manufacturing must be implemented in the whole process and all industry sectors.

21 century increases environmental concerns globaHy. Lightweighting becomes

critical demand in automotive, railways, aircrafts and other industries, particularly in

the new energy vehicles.

- 21 -

2. Lightweight demand of automotive industry welcomes Qinghai Salt

Lake green Magnesium.

The new energy vehicle plan in "Made in China 2025" strategy will

accelerate the lightweight trend of automotive industry. This policy and

trend becomes the perfect timing for Qinghai Salt Lake's "Green Mg".

-22-

2. Lightweight demand of automotive industry welcomes Qinghai Salt

Lake green Magnesium.

Qinghai Salt ,Lake unique advantages on MgCl2 resources, clean energy,

dry and oxygen-poor conditions are the solid ground of green Mg supply.

- 23 -

2. Lightweight demand of automotive industry welcomes Qinghai Salt

lake green Magnesium.

Qinghai Salt Lake welcomes and is open to collaborate with all parties to enhance

the technology development for new Mg alloys, new processes and new Mg alloy

applications, through its collaborative innovation platform.

-24-

Thanks for your continuous concern

and support to Qinghai Salt Lake Mg

project, and welcome you all to visit

us!

- 25-

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