Cost-Inventory Game, Market Consolidates to Find Bottom [SMM Magnesium Weekly Data]

Production and Inventory Brief Review

1.1 Weekly Production

From September 11 to September 17, the weekly production of sample magnesium plants nationwide stood at 22,262 mt, with a weekly operating rate of 73.04%, down 0.55% WoW. According to our survey, multiple primary magnesium smelters resumed production in early this month, driving a slight increase in output, but the growth was offset by production cuts caused by maintenance at some enterprises last week. As a result, primary magnesium production this week remained in a consolidation trend. SMM tracking also indicates that more primary magnesium smelters are expected to resume production next week, at which point primary magnesium output is likely to trend upward.

1.2 Weekly Inventory

1. This week, inventory at primary magnesium smelters nationwide fell 1.38% WoW, with in-factory inventory trending downward. The core reason is that by the beginning of this week, the earlier gains in magnesium prices had largely been given back, and magnesium prices pulled back to downstream buyers' psychological expectations. Backlogged orders and pre-holiday stockpiling demand ahead of the two festivals were released in tandem, leading to a notable recovery in market trading, with spot order trading volume on some working days approaching 2,000 mt. In addition, current supply pressure remained relatively manageable, which together drove a slight pullback in primary magnesium inventory.

2. This week, social inventory of magnesium ingot rose 1.59% WoW, with overall inventory pressure increasing. At the beginning of the week, a wave of concentrated restocking from rigid demand briefly boosted spot trading, but the market improvement was short-lived and failed to sustain. On one hand, magnesium plants held prices firm, which to some extent dampened downstream purchasing enthusiasm; on the other hand, real end-user demand remained weak, and the market lacked sustained buying momentum. Foreign trade showed no significant improvement, with current transactions largely reliant on deliveries of previously placed orders, and no new large orders landed to provide support. Meanwhile, affected by recent weather conditions, port shipping schedules were tight and ocean freight rates stayed high, hampering the delivery of export orders and significantly slowing the pace of export destocking. Purchased cargoes in the market could not be quickly transmitted to downstream and overseas buyers, leading to continued accumulation of goods and ultimately causing a marked buildup in social inventory this week, especially at ports.