Supply Side: In January, as the acquisition and storage activities gradually deepened, the magnesium market saw a coexistence of tight spot supply of magnesium ingots from manufacturers and high inventory levels of magnesium ingots in warehouses used for acquisition and storage. Magnesium prices consolidated at low levels with narrowing % change. However, due to the current low magnesium prices and significant losses for magnesium plants, occasional news of production cuts emerged. It is expected that magnesium ingot production in January will decrease by 5.6% MoM. In February, with the arrival of the traditional Chinese New Year, downstream operations gradually halted, and magnesium plants entered a holiday mode on the business side. This year, magnesium plants maintained normal production. Due to the advance sale of futures, magnesium plants faced relatively small inventory pressure, and their operating rate remained stable. It is expected that magnesium ingot production in February will primarily decline by 7.4% MoM due to fewer working days. In March, as temperatures gradually rebound, magnesium plants suffering from losses may show an increased willingness to halt production for maintenance. Correspondingly, the likelihood of resumption of production for plants that halted operations in Q4 2024 may also increase. Considering both prices and inventory are at low levels, magnesium plants exhibited a strong wait-and-see sentiment with relatively slow actions. Few plants halted production for maintenance or resumed operations. It is expected that magnesium ingot production in March will primarily increase by 12.9% MoM due to more working days.
Demand Side: Chinese downstream enterprises were affected by the Chinese New Year, leading to halts in production and operations, with production gradually coming to a standstill and demand correspondingly decreasing. Additionally, some downstream magnesium alloy die-casting plants reportedly entered holiday mode early due to insufficient orders, resulting in relatively weak magnesium alloy demand in Q1.
Raw Materials: In Q1 2025, the ferrosilicon industry is expected to operate at a marginal profit level, with profit margins gradually recovering and ferrosilicon prices fluctuating within a narrow range. In Q1 2025, the coal market prices may trend high initially and then decline, with the price center lower than in Q4 2024.
In summary, magnesium ingot production in Q1 is expected to maintain a downward trend. Magnesium plants faced tight spot supply, and magnesium ingot spot inventory entered a destocking mode. The upside room for magnesium ingot prices opened up, but considering the post-Chinese New Year demand recovery remains uncertain, the upward momentum for magnesium prices is insufficient. It is expected that magnesium ingot prices in Q1 2025 will fluctuate within the range of 16,000-16,500 yuan/mt.
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