Conflicting supply-demand forces persist amid buyer-seller standoff. What’s next for magnesium prices?

Since the start of June, the tug-of-war between sellers and buyers over magnesium prices has been intensifying. The EXW price of 99.90% magnesium ingot (Fugu, Shenmu) moved sideways around 16,300–16,400 yuan/mt, with the trading range narrowing significantly. The magnesium market was mired in a supply-demand stalemate, as end-users' acceptance of high magnesium prices declined markedly, while primary magnesium smelters held their bottom line supported by costs. As a result, magnesium prices were stuck in a pattern where they could neither rise nor fall easily.

A closer look at the primary magnesium market's performance in early June reveals notable divergence between supply and demand. On the supply side, smelters in major producing regions raised output simultaneously. The drivers of the increase fell into two categories: first, enterprises operated at full capacity to dilute fixed production costs, thereby reducing the comprehensive cost per tonne of magnesium ingot; second, integrated enterprises across the entire industry chain maintained production scale to ensure internal supply of raw materials for captive use. Driven by this, the industry's overall operating rate edged up, and China's total primary magnesium production in June is expected to rise to 108,600 mt. On the demand side, off-season characteristics were pronounced. Combined with a wait-and-see sentiment toward purchases amid high spot prices, the market saw only just-in-time procurement, with overall trading sentiment mediocre. By segment, magnesium alloy plants maintained a moderate raw material procurement pace, while magnesium powder processing and overseas export orders weakened simultaneously. The market thus exhibited a structure of strong supply and weak demand. Downstream buyers' fear of high prices continued to intensify, and in the absence of concentrated restocking support, upward momentum for magnesium prices was severely lacking.

Furthermore, after the coal mine explosion in Shanxi in late May, prices of raw coal and semi-coke strengthened in tandem. Although price increases in by-products such as coal tar partially offset coal gas expenses, the price hike in semi-coke led to sales resistance, and on a comprehensive basis, coal gas costs for smelting still edged up slightly. Pressure from the raw material side continued to accumulate. Since H2 2025, the price of dolomite from Wutai, Shanxi has risen in a stepwise manner, significantly increasing smelters' procurement costs for high-quality dolomite. With multiple raw material costs rising simultaneously, many primary magnesium smelters are now approaching their break-even point. Supported by solid cost floors, producers hold firm intentions to hold prices firm.

Outlook

At present, multiple bearish factors are emerging in the magnesium market. Producers' willingness to hold prices firm and downstream buyers' fear of high prices are locked in intense standoff at the 16,300–16,400 yuan/mt level, making the direction of market prices difficult to predict.

Supply-demand pressures continue to intensify, and against the backdrop of persistently weakening end-use demand, inventories at primary magnesium smelters are accumulating overall, with the market pricing center gradually tilting toward the demand side. However, inventory structure shows clear divergence. Current producer inventories are mostly concentrated at top-tier players with strong financial strength, and available supplies in the market account for only about half of total producer inventory. The core pressure now lies in absorbing the daily surplus output generated by high operating rates.

As the hot summer season sets in, maintenance plans at primary magnesium smelters are successively implemented, and market attention gradually shifts to expectations of supply contraction due to production cuts. The market is currently in a delicate balance of ample supply and weak demand. The core focus of magnesium price dynamics going forward will revolve around a race against time between the supply contraction window created by summer maintenance-related production cuts and the period of weakening external demand brought by the summer break outside China.