Multiple bullish and bearish factors are pulling against each other, and the tug-of-war between sellers and buyers remains undecided. Where is the magnesium market headed? [SMM Analysis]

Since entering June, the tug-of-war between sellers and buyers in magnesium prices has continued to intensify. The EXW price of 99.90% magnesium ingot (Fugu, Shenmu) moved sideways around 16,300–16,400 yuan/mt, with the price range narrowing significantly. The magnesium market has been stuck in a supply-demand stalemate, with end-user acceptance of high magnesium prices clearly weakening. Meanwhile, primary magnesium smelters held firmly to their bottom lines—supported by costs. As a result, magnesium prices remained trapped in a pattern where rising and falling were equally difficult.

Taking a closer look at the operating logic of the primary magnesium market in early June, the divergence between supply and demand was notable. On the supply side, production at smelters across major producing regions rose simultaneously, driven mainly by two factors: first, enterprises operated at full capacity to dilute fixed production costs, thereby lowering the overall cost per mt of magnesium ingot; second, integrated enterprises across the entire industry chain actively maintained production scale to secure internal self-supply of raw materials. Driven by this, the industry’s overall operating rate edged up, with total national primary magnesium production in June expected to reach 108,600 mt. On the demand side, off-season characteristics became prominent, compounded by procurement wait-and-see sentiment arising from high spot prices. The market only saw just-in-time procurement, with overall trading activity mediocre. By segment, raw material purchasing pace at magnesium alloy plants was subdued, while magnesium powder processing and overseas ex-China orders also weakened, shaping an overall market pattern of strong supply and weak demand. Downstream fear of high prices continued to ferment, and lacking support from concentrated restocking, upward momentum for magnesium prices was severely insufficient.

Additionally, after the Shanxi coal mine explosion accident in late May fermented, raw coal and semi coke prices rose together. Although price increases for by-products such as coal tar partially offset coal gas expenses, the semi coke price rise met with resistance in sales. On a comprehensive basis, coal gas costs for smelting still edged up slightly. Pressure on the raw material side also continued to accumulate. Starting from H2 2025, Wutai dolomite prices in Shanxi rose in steps, significantly increasing the procurement costs of high-quality dolomite for magnesium producers. With multiple raw material costs trending upward, many primary magnesium smelters are currently approaching the break-even line, establishing firm cost-side floor support and fueling strong hold-prices-firm intentions among producers.

Outlook

At the current stage, multiple bearish factors in the magnesium market are emerging simultaneously. Producers’ firm price intentions and downstream fear of high prices are locked in intense bargaining around the 16,300–16,400 yuan/mt range, making the direction of market prices unclear.

Supply-side pressure continues to build, and with downstream end-use demand persistently weakening, primary magnesium smelters’ inventory levels are accumulating overall, gradually tilting the market pricing center toward the demand side. However, inventory structure shows clear divergence. Existing plant inventories are mostly concentrated at well-capitalized top-tier players, with available cargo in the market accounting for only about 50% of total plant stocks. The core pressure currently lies in absorbing the daily surplus output resulting from high operating rates.

With the arrival of the hot summer season, maintenance plans at various primary magnesium smelters will be implemented in succession. Market attention is gradually shifting toward expectations of supply contraction driven by production cuts. The overall market is in a fragile equilibrium—ample supply coupled with weak demand. Moving forward, the core bargaining point for magnesium prices will center on a race against time between the supply contraction window from summer maintenance-driven production cuts and the period of weakening overseas demand triggered by the summer break outside China.