Pre-Labour Day Holiday Restocking and Stockpiling, Suppliers' Offers Remained Firm, Magnesium Prices Rose for Two Consecutive Days [SMM Commentary]

Ahead of the Labour Day holiday, the magnesium market saw a recovery in trading activity during the first half of this week, with spot prices holding up well and magnesium prices rising for two consecutive days. Current market support mainly came from the continued release of pre-holiday rigid stocking demand from end-users, with downstream procurement pace following in an orderly manner, effectively revitalizing trading activity in the market. On the other hand, rising coal and ferrosilicon futures prices on the raw material side also provided certain cost support for the magnesium market. Supported by multiple positive factors, suppliers generally maintained firm pricing sentiment, low-priced spot cargo in the market gradually diminished, and the overall magnesium market showed a generally stable with slight rise trend.

Magnesium prices rose for two consecutive trading days

Spot price side: magnesium ingots and magnesium alloys continued the upward trend from the 28th. Specifically, the SMM 99.90% magnesium ingot (Fugu, Shenmu) price on April 29 was 16,600-16,700 yuan/mt, with an average price of 16,650 yuan/mt, up 0.3% from the previous trading day.

The core driver behind this two-day consecutive rise in magnesium prices was pre-holiday restocking demand from downstream end-users. As the Labour Day holiday approached, considering the holiday factor, downstream deep-processing and manufacturing enterprises initiated stockpiling operations in advance, and market procurement enthusiasm improved compared to the previously sluggish conditions. Most downstream enterprises abandoned their earlier wait-and-see sentiment and entered the market to purchase based on their rigid production needs, proactively locking in spot inventory to hedge against post-holiday supply fluctuation risks. The sustained concentrated restocking demand rapidly consumed previously accumulated low-priced inventory in the market, with low-priced resources basically digested and cleared, the market price floor continued to rise, directly driving magnesium prices to raise consecutively. Overall trading activity and transaction sentiment in the market improved during the first half of this week.

Outlook

Based on the current supply and demand performance in the market, the concentrated release of pre-holiday restocking demand effectively reversed the previously weak market sentiment, boosting confidence among traders and producers to a certain extent. However, from the market pace perspective, after a round of concentrated restocking, downstream stocking demand had been gradually released, and the pre-holiday restocking trend was basically coming to an end. As the Labour Day holiday approached, market procurement activities gradually ceased, and concentrated trading momentum was expected to pull back. Based on current market conditions, domestic magnesium prices were expected to remain generally stable in the short term.

In the long term, the domestic magnesium market needs to focus on two aspects going forward: first, the maintenance arrangements and production pace changes of domestic magnesium ingot producers — if mainstream smelters arrange concentrated equipment maintenance and production cuts later, this will directly compress overall market supply, alter the current supply-demand balance, and drive price fluctuations; second, the recovery of demand in markets outside China — currently, ex-China magnesium product demand remained generally stable but weak, and whether export orders can steadily increase and whether export markets can recover will directly affect domestic magnesium ingot exports, becoming an important factor influencing medium and long-term magnesium price trends.