Production and Inventory Briefing
1.1 Weekly Production
From October 9 to October 15, weekly production at sampled magnesium smelters nationwide stood at 22,176 mt, with a weekly operating rate of 72.76%, down 0.88% MoM. According to SMM survey, two primary magnesium smelters halted production for maintenance during the National Day holiday, and one primary magnesium smelter cut production. However, the reduction from these smelters was largely offset by production growth at other smelters, leaving the overall production cut minimal and not enough to ease the current oversupply. SMM learned that multiple primary magnesium smelters in major producing regions have maintenance plans due to losses, and primary magnesium production is expected to decline going forward.
1.2 Weekly Inventory
1. This week, inventory at primary magnesium smelters nationwide fell 3.52% MoM. Primary magnesium smelters maintained normal production during the National Day holiday. Although smelters pre-sold some futures before the holiday, some magnesium ingots still failed to reach the end-use market, worsening the oversupply of magnesium ingots. Smelters actively stimulated transactions with low prices, and some achieved notable destocking, leading to a downward trend in primary magnesium inventory nationwide. As magnesium prices have fallen to a year-to-date low, smelters are increasingly inclined to halt production, and the downward trend is expected to continue.
2. This week, social inventory of magnesium ingots rose 0.3% MoM. Social inventory of magnesium ingots was basically flat MoM, mainly due to simultaneous weakness in both prices and demand. After the holiday, domestic magnesium ingot prices continued to drift lower, and procurement sentiment in the already weak Chinese and overseas markets became more cautious. Downstream procurement willingness was low due to expectations of further price declines, while significant pressure for lower prices reduced traders' enthusiasm to take orders. This vicious cycle slowed the procurement pace of traders. Except for some deliveries of earlier orders, most traders maintained back-to-back operations, with in-factory inventory flowing directly to the market, leaving social inventory of magnesium ingots basically flat this week.
