Consolidating at Lows and Awaiting a Turning Point: Clear Pattern of Growth in Both Supply and Demand in the August Magnesium Market [SMM Analysis]

China's magnesium prices are currently consolidating at low levels in a narrow range, with market price fluctuations narrowing significantly. Coupled with industry participants taking summer vacations and a quieter news flow, overall trading activity is sluggish. As the market enters the key window in August, magnesium prices are expected to see a new trend inflection point; the supply-demand structure, regional supply differences, and cost support will jointly dictate subsequent market direction.

Supply side, in July, primary magnesium production fell sharply and posted a significant MoM decline due to concentrated maintenance at primary magnesium producers. According to SMM survey data, as maintenance in major producing areas gradually winds down in August, primary magnesium production is expected to recover slightly, with a projected MoM increase of over 4,000 mt; overall growth will be limited. In addition, production growth will show regional divergence; supply growth in Shaanxi will be offset by production cuts in Xinjiang, leaving the nationwide supply recovery mild. The magnesium market achieved modest destocking in July, and the supply-demand pattern improved slightly, but the extent of destocking was not significant. In August, nationwide supply will edge up slightly. Coupled with overseas summer breaks and the die-casting off-season nearing their end, overall market inventory buildup pressure will remain relatively small. However, as Shaanxi is the core producing region, local supply growth will exceed the national average; moreover, there is a lag in inter-regional cargo allocation, so magnesium prices are expected to face some downward pressure in mid-to-late August.

Demand side, in August, supply in the magnesium alloy market is consolidating at lows and stabilizing, and production is expected to rebound slightly. However, dragged by persistently weak demand from the two-wheeled electric vehicle segment, overall magnesium alloy growth will be limited. In the export market, as overseas summer breaks end, previously accumulated backlog orders will be gradually released, downstream restocking demand will emerge, and export demand for magnesium ingot may recover slightly.

Overall, China's magnesium market will see simultaneous growth in both supply and demand in August. Primary magnesium producer inventories will be higher than in July, but overall pressure will remain controllable. Currently, coal prices are on a strong uptrend, providing solid cost support for magnesium prices, and price movements have some resilience. Meanwhile, the supply side is gradually recovering, and smelters are facing increasing shipment pressure. Magnesium prices in August are expected to remain relatively firm on the back of cost support; in mid-to-late August, the phased downward pressure will become more pronounced due to concentrated supply releases in Shaanxi.