Cost-Driven Magnesium Prices Shot Up, Weak Demand Makes Rally Unsustainable [SMM Magnesium Weekly Review]

1 Market Review

1 Dolomite

This week, the EXW tax-exclusive price of 1-3 cm dolomite (Wutai) was 128 yuan/mt, flat WoW, and the EXW tax-exclusive price of 2-4 cm dolomite (Wutai) was 158 yuan/mt, flat WoW.

This week, delivered prices of dolomite remained generally stable. Affected by the continued production halt at a major large dolomite mine in Wutai, local supply of high-quality material remained tight, and primary magnesium smelters gradually shifted their procurement focus outward, turning to Hebi in Henan, Datong in Shanxi, Shiyan in Hubei, and other areas for supplementary supply. As multi-channel replenishment continued to arrive, overall market supply was relatively ample, and prices showed no notable fluctuations, maintaining a firm trend.

1.2.1 Magnesium Ingot (Fugu and Shenmu - Main Production Areas)

This week, magnesium prices held up well. As of press time, mainstream quotations for 99.90% magnesium ingot in main production areas were 16,050-16,150 yuan/mt, up 300 yuan/mt WoW.

This week, magnesium ingot market prices climbed steadily. The reason was that coal and ferrosilicon prices rose at high levels, pushing up primary magnesium smelting costs. Supported by the cost side, smelters' sentiment to hold back from selling strengthened notably, and magnesium prices continued to rise. Additionally, as some foreign trade traders approached delivery periods, downstream buyers chased higher prices out of panic to replenish stocks, briefly pushing magnesium ingot prices up to 161,000 yuan/mt. However, the current magnesium market still shows a supply-strong, demand-weak pattern overall. As of press time, affected by weak follow-through in transactions, a pullback in magnesium prices has gradually emerged.

1.2.2 Magnesium Ingot (Tianjin Port - China FOB)

This week, China FOB prices were quoted at $2,280-2,380/mt, with an average of $2,330/mt. This week, magnesium ingot FOB prices showed an overall upward trend, up $40/mt WoW.

This week, magnesium ingot FOB prices were passively lifted by domestic EXW quotations, showing an overall upward trend. Affected by rising prices of raw materials such as coal, production costs for domestic magnesium ingot enterprises increased. Due to loss pressure and profit considerations, producers strengthened their intention to hold prices firm, driving domestic quotations higher and transmitting to the foreign trade market. This FOB price increase did not stem from a substantive recovery in overseas demand. Although overseas downstream inquiries increased somewhat, they were mostly tentative. Even when a small number of actual deals were concluded, transaction volumes were small, and buyers' push for lower prices was prominent. Against this backdrop, traders passively raised their export quotations, lifting overall quotation levels, but the market lacked effective support from actual deals, foreign trade transactions remained sluggish, and market wait-and-see sentiment further intensified. In the short term, the magnesium ingot foreign trade market is expected to remain under pressure, and close attention should still be paid to the release of export orders.

1.3 Magnesium Powder

This week, mainstream tax-inclusive EXW prices for 20-80 mesh magnesium powder in China were 17,300-17,400 yuan/mt, and China FOB prices were $2,440-2,540/mt.

This week, the magnesium powder market was driven by fluctuations in raw material magnesium ingot prices, and magnesium powder quotations were passively raised. However, the price increase did not improve market transactions. Downstream end-use demand remained sluggish overall, and some magnesium powder producers chose to cut production or halt operations, leading to a pullback in industry production. Meanwhile, constrained by relevant export policies, the magnesium powder export side was under pressure. Combined with weak domestic market demand, magnesium powder producers faced intensifying production and sales pressure, and inventories rose accordingly. Overall, short-term magnesium powder market conditions are likely to continue consolidating.

1.4 Magnesium Alloy

This week, mainstream tax-inclusive EXW prices for magnesium alloy in China were 17,950-18,300 yuan/mt, and mainstream FOB prices for magnesium alloy in China were $2,605-2,685/mt.

This week, the core features of the magnesium alloy market were weak supply and demand and continued pressure on processing fees. On the supply side, although some producers underwent maintenance shutdowns, spot inventory accumulated earlier in the industry remained relatively ample, market supply was sufficient, and competition among peers was intense. The demand side dragged more notably. According to feedback from some smelters, starting from mid-to-late August, some die-casting enterprises were forced to halt production for maintenance due to insufficient orders, and operating rates declined, directly reducing actual magnesium alloy consumption. In terms of prices, magnesium alloy consolidated on a strong note along with upstream magnesium ingot, but this was more of a passive cost-driven increase, with insufficient support from its own fundamentals. Both supply and demand weakened simultaneously, further highlighting the pressure on processing fees.

2 Weekly Summary

This week, mainstream quotations for 99.90% magnesium ingot in main production areas were 16,050-16,150 yuan/mt, up 300 yuan/mt WoW, and FOB prices were quoted at $2,280-2,380/mt, with an average of $2,330/mt. During the week, magnesium ingot prices were driven higher by rising coal and ferrosilicon costs, and some chase-buying replenishment appeared in foreign trade. However, the overall market remained supply-strong and demand-weak, high-priced transactions were weak, and signs of a pullback in prices emerged in the later period. Overseas demand did not show a substantive recovery, with market activity mostly consisting of tentative inquiries, limited actual deal volumes, and prominent buyer pressure for lower prices, leaving transactions still sluggish. Downstream magnesium powder and magnesium alloy passively followed the cost-driven increase in magnesium ingot. End-use demand for magnesium powder was sluggish, some enterprises cut production or halted operations, exports were restricted, and inventories rose somewhat. Magnesium alloy spot inventory was ample, competition among peers was intense, die-casting enterprises faced insufficient orders and declining operating rates, and processing fees remained under pressure. In the short term, cost support and weak demand are locked in a tug-of-war, and the upward momentum in magnesium prices is losing steam. Market conditions may return to consolidation, with close attention to the release of domestic and export orders going forward.