Magnesium Prices See Volatility Amid Coal Cost Fluctuations, Demand Weakness Persist

[Maintenance Drives Supply Contraction, Magnesium Market Inventory Diverges with Weakness] This week, domestic primary magnesium enterprise operating rates pulled back, with multiple smelters initiating maintenance and production cuts. Short-term raw material supply contracted somewhat, and production is expected to remain at low levels going forward. Inventory showed clear divergence, with smelter plant inventory edging higher. Despite maintenance reducing output, suppliers in the market dumped goods at low prices, and procurement orders flowed more toward circulating social inventory, causing passive inventory buildup at plants. Social inventory shifted to destocking, as traders took advantage of market conditions to clear earlier low-priced stockpiles. Downstream buyers exhibited notable fear of high prices, with procurement limited to rigid demand and no concentrated stockpiling activity. The continuous release of low-priced supply weighed on prices, compounded by the market's rush to buy amid continuous price rise and hold back amid price downturn mentality, leaving magnesium prices under pressure in the short term.

【SMM Weekly Magnesium Cost Briefing】From September 4 to September 10, the average production cost of magnesium ingots in Shaanxi province stood at RMB 16,084 per ton, down by around 6.1% week on week. The decline in cost was mainly driven by the drop in prices of raw materials. In terms of profits, the average profit of the industry this week came in at RMB 3 per ton, marking an overall turnaround from losses to profits, yet the profit margin is extremely thin, basically hovering around the break-even line, with an average profit margin of 0%. On the whole, the cost of magnesium ingots has dropped significantly this week. Affected by the falling magnesium prices, the recovery of industrial profits remains limited, and most manufacturers are still on the verge of slim profit or loss. The short-term cost support has somewhat weakened, thus continuous attention should be paid to the price trend of raw materials and the recovery of downstream demand.

【SMM Weekly Magnesium Inventory Briefing】This week, the national inventory of primary magnesium smelting enterprises increased by 1.33% month-on-month. While primary magnesium smelting enterprises in major production regions suspended production for maintenance this week, leading to a notable reduction in supply pressure, the inventory of magnesium ingots still registered an upward trend. The primary reason is that driven by the sharp surge in coal prices, magnesium prices have risen substantially, and quotations from primary magnesium smelting enterprises remain at a high level. Meanwhile, holders are offloading goods in the market at low prices, and most market transactions are concentrated on digesting social inventories, which has diverted the already scarce purchase orders, resulting in a slight increase in magnesium ingot inventory.