Magnesium Prices Rise for Three Consecutive Sessions! Cost Side Remains "Overheated," but Demand Side Struggles to "Take Over" [SMM Commentary]

SMM, September 2:

Affected by safety supervision, the actual effective supply growth from production resumptions at domestic coal mines has been limited. Combined with a notable pullback in the number of trucks clearing customs at the Ganqimaodu port, spot coal supply has tightened, and prices have continued to rise. The increase in coal prices has driven smelting raw materials such as semi coke and ferrosilicon higher in tandem, with the center of magnesium smelting costs continuing to climb, pushing magnesium prices to a three-session winning streak. However, downstream acceptance of high-priced cargoes remains limited, and the magnesium market is currently in a tug-of-war between upstream cost support holding prices firm and downstream demand weakness with reluctance to purchase at high prices.

Magnesium Ingot Prices Rise 1.86% over Three Trading Days on Cost Support

Spot market: On September 2, the magnesium ingot market showed a pattern of firm prices in the Chinese market and passive increases in foreign trade. Taking the average price trend of 99.90% magnesium ingot (Fugu, Shenmu) as an example, the average price on September 2 was 16,100 yuan/mt, up 0.31% from the previous trading day. Compared with the average price of 15,800 yuan/mt on August 28, the September 2 average price of 16,100 yuan/mt rose by 300 yuan/mt, an increase of 1.86%.

On the supply side, smelters showed strong willingness to hold prices firm due to rising costs, with offers continuing to be pushed higher, but high-priced sales met resistance, and some price levels saw no transactions. On the demand side, traders sold at lower prices, downstream purchasing attitudes were cautious, and wait-and-see sentiment was thick in the market, highlighting resistance to further price increases. Although FOB prices in foreign trade moved higher passively along with domestic EXW prices, this round of FOB price increases did not reflect a genuine recovery in demand outside China, leaving high prices lacking support from actual orders. Meanwhile, overseas downstream buyers showed limited acceptance of the price increases, order releases were insufficient, and foreign trade activity was mediocre.

Outlook

The pace of production resumptions at coal mines remains slow, with high safety supervision pressure persisting and effective coking coal supply insufficient. Most coal mines hold coking coal inventories at low levels, with strong sentiment to hold back from selling and hold prices firm. Online auction market heat remains undiminished, with premium transactions still the mainstream, and the coking coal market may hold up well in the short term.

For the magnesium market outlook, the short-term coal supply gap is difficult to close, and with rising expectations for the fourth round of coke price increases to be implemented, cost-side support for magnesium prices from raw materials remains. However, both domestic and overseas demand currently lack strong drivers, and magnesium prices are likely to move sideways in the short term. Going forward, close attention should be paid to the price trends of raw materials such as coal, ferrosilicon, and semi coke.

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