In 2025, the polarization trend in China's domestic magnesium industry became prominent. Upstream magnesium ingots were deeply mired in an oversupply downturn, while downstream magnesium alloys saw a surge in demand starting from September, quickly shifting to an undersupply situation. Looking ahead to 2026, the resonance between magnesium alloy capacity expansion and demand growth is expected to gradually release the boosting effect on primary magnesium, potentially leveraging a reversal in the supply-demand pattern across the entire industry chain.
Annual Review of Magnesium Prices
In 2025, the price of 99.90% magnesium ingot exhibited an "M"-shaped trend, with the price center significantly shifting downward. The price dropped from 16,000 yuan/mt at the beginning of the year to the year's low of 15,050 yuan/mt on March 7. Subsequently, the price rebounded from the low, reaching the year's high of 17,450 yuan/mt on May 13. As traders, driven by fear of high prices, sold off at low prices, it triggered a price collapse. The price fluctuated weakly to 15,950 yuan/mt by June 10. Later, downstream buyers purchased on dips, and continued destocking by smelters helped boost the magnesium price, pushing it up again to 17,400 yuan/mt. From the end of Q3 to Q4, concentrated production resumptions by magnesium plants reversed the supply-demand pattern once more, leading to a sharp increase in supply pressure. The price fell below 16,000 yuan/mt for the third time on December 2, and then traded in a low range with consolidation. Overall, the price fluctuation range for the entire year of 2025 was within 2,500 yuan, smaller than the previous year. The national average rebar price for the year was 16,344 yuan/mt, down 9.4% YoY.
January-March: Macro news-wise, the escalation of Sino-US trade friction spread market panic sentiment, significantly affecting bulk commodity prices overall; high coal supply led to continuously falling prices, resulting in weak cost support; coupled with high magnesium ingot inventory during the Chinese New Year period, fundamental drivers were insufficient, causing the magnesium ingot price to continuously fall to the year's low.
March-May: Collective production reductions and suspensions by magnesium smelters earlier significantly reduced magnesium market supply, leading to continuously improving fundamentals. Combined with expectations of "anti-involution" policy-driven price increases, stricter safety inspections in coal mines, and rising raw material prices, the price staged a rebound to the mid-year high under cost support.
May-June: Market trading logic returned to fundamentals, with purchasers rationally returning. Combined with the off-season demand during the summer period, demand-side support was insufficient. Spot prices fluctuated downward, and the magnesium price fell to a low level.
June-August: The bulk commodity market continued to heat up, with prices of various non-ferrous metals rising jointly. The ferrous metals sector also rose synchronously, strongly driven by soaring coking coal prices. Influenced by the sharp price increases of core raw materials for primary magnesium, such as coal and ferrosilicon, and coupled with favorable conditions for a staged rise in the magnesium market's fundamentals, the magnesium price broke through the 17,000 yuan mark this week.
August-December: The successful production resumptions by primary magnesium smelters in major producing areas increased daily production to around 2,000 mt. The sudden increase in primary magnesium supply led to a supply-demand imbalance in the magnesium market. Downstream purchasers delayed procurement, while primary magnesium smelters' willingness to sell strengthened. The differing sentiment between buyers and sellers pushed the magnesium price into a continuous gradual decline.
Magnesium Market Supply and Demand Fundamentals
Supply-side data indicates that the loose pattern in the current magnesium ingot market remains unchanged. In 2025, primary magnesium capacity reached 1.59 million mt, with production expected to total 1.0137 million mt, up 6.95% QoQ from the previous year. The full-year operating rate is projected to be 63.67%. A total of 57 primary magnesium smelters were in operation nationwide. Shaanxi accounted for 64% of primary magnesium production, with output increasing by over 70,000 mt QoQ from 2024, and its share of national production rose slightly. Shanxi contributed 15%, Inner Mongolia 6%, and other provinces 15%.
At the beginning of 2025, magnesium plants were near the cost curve, leading some to suspend operations for maintenance. Primary magnesium production consolidated at the bottom in Q1. In Q2, smelter inventory continued to decline, spot market inventory was relatively tight, magnesium prices bottomed out, smelter profit margins improved, and production increased slightly. In Q3, production fluctuated as some smelters underwent summer maintenance, but overall output saw a slight increase. In Q4, summer maintenance concluded, production recovered significantly, and policy support prompted idled plants to resume operations, leading to a substantial rise in Q4 output.
In stark contrast to the sluggish magnesium ingot market, the magnesium alloy market experienced explosive growth starting in September. Data shows that national magnesium alloy production reached 408,800 mt in 2025, up over 15.20% YoY. The industry operating rate climbed to 80.35% in December, up 9.62% MoM and surging 46.06% YoY. The rapid increase in the capacity utilization rate directly translated into production growth. Robust demand was even more pronounced, with leading magnesium alloy enterprises having orders scheduled until February next year. The widening supply gap shifted the market from previous price negotiations to a rational value recovery.
Market Outlook
The surge in magnesium alloy demand is primarily driven by broad expansion in downstream applications. New energy vehicles (NEVs) are the core driver, with average magnesium alloy usage per vehicle rising from 3.8 kg for traditional internal combustion engine vehicles to 6.3 kg for NEVs. Demand is also growing rapidly in emerging sectors such as two-wheeled electric vehicles, the low-altitude economy, and humanoid robots. Companies like Yadea and Aima have begun bulk procurement of magnesium alloy frames, creating diversified demand support. The industry generally holds an optimistic outlook. Although the supply-demand imbalance in the magnesium ingot market is unlikely to reverse quickly in the short term, global magnesium alloy demand is expected to exceed 600,000 mt in 2026. With penetration rates continuing to rise in core sectors like NEVs, magnesium alloy's capacity to absorb magnesium ingot supply will significantly strengthen. SMM analysis suggests that the ongoing expansion of the magnesium alloy market will gradually transmit upstream. Driven by strong demand, China's magnesium industry is expected to break the current structural imbalance and achieve a supply-demand reversal across the entire industry chain.
