The sharp rise of magnesium price is unprofitable for processing enterprises-- Review and Prospect of magnesium Market in September

Review and Forecast of Market Price trend

Review of domestic Price trend

In September, the daily average price of magnesium in China fluctuated between 30500 yuan and 71200 yuan per ton, with an average monthly price of 41751.29 yuan per ton, up 229.68 percent from the same period last year. From January to September, the average price of magnesium was 20424.43 yuan per ton, an increase of 51.26% over the same period last year. In September, the price of magnesium rose directly, from 30,000 yuan / ton in the first ten days to 45000 yuan / ton in the middle of the year, and several thousand yuan a day in the last ten days, with the price rising as high as 71000 yuan / ton, a record high. This phenomenon is mainly due to the influence of national energy consumption double control and local power restriction measures, enterprises in the main magnesium producing areas stop production and reduce production, magnesium market supply is seriously insufficient, at the same time, the price of raw material ferrosilicon is rising, which further drives the high operation of magnesium price. In front of the sky-high price of magnesium, most downstream enterprises have no profits to speak of, only a few rigid demand enterprises and exporters issue a small number of orders to purchase, most processing enterprises reduce production, mostly wait and wait, and then choose the opportunity to purchase and replenish goods only after the magnesium price falls. Market supply and demand is weak, magnesium prices fluctuate back at the end of the month, but the whole is still at a high level. In the short term, the state's efforts to control energy consumption will not be weakened, the environmental upgrading of enterprise production facilities will also take some time, the spot shortage in the market will continue, and magnesium prices will remain high.

By the end of September, the mainstream quotations of manufacturers in Shanxi, Ningxia and Shaanxi were 52600-52700 yuan / ton, 52400-52500 yuan / ton and 52400-52500 yuan / ton respectively.

On the export side, the price of FOB rose sharply in September compared with the previous period. In September, the average monthly price of FOB was 6573.57 US dollars / ton, up 237.23% from the same period last year. From January to August, the average price was 3258.06 US dollars per ton, up 61.42 per cent from the same period last year.

By the end of September, the export quotations of some manufacturers and traders were between US $8240 and US $8250 per ton of FOB.

Review of the Price trend of International magnesium Market

American market

The price of magnesium in the US market rose sharply in September.

According to the American Metal Weekly, the western spot price of American magnesium ingots rose from $2.25-$2.60 / lb at the beginning of the month to $2.40-$2.90 / lb in the middle of the month and rose sharply to $3.50-$4.50 / lb in the second half of the month. The import price of US magnesium ingot traders rose slightly in September from US $2.05-US $2.15 / lb at the beginning of the month to US $2.40-US $2.90 / lb in the middle of the month, and rose sharply to US $3.25-US $4.25 / lb in late September. The price of US die-casting alloy (trader) rose from US $2.20-US $2.50 / lb to US $3.50-US $4.00 / lb in September.

European market

European market-related quotations rose sharply in September.

The price of (MB) magnesium ingot soared in September, from $4300-$4625 / ton at the beginning of September to $5350-$5850 / ton at the beginning of September, and to $7000-$8000 / ton at the end of September. The European free market price of American Metal Weekly (MW) rose sharply to $9500-$11000 / ton from $4950-$5250 / ton at the beginning of the month. European strategic small metal Rotterdam warehouse quotation rose from US $3550 / ton to US $4700 / ton.

Outlook for the future

In September, the price of magnesium rose to 71000 yuan per ton for the first time, exceeding the price of titanium sponge, resulting in basically no profit for downstream enterprises, suspending production and reducing production to ease the pressure on costs, and the market trading volume dropped sharply. The follow-up situation of resuming production is not clear. The double control of energy consumption and power restriction measures will continue, and the current situation that supply is less than demand will continue in the market. The rapid rise in magnesium price is not conducive to the development of downstream processing enterprises. In order to improve the current situation and promote the transaction, the magnesium price may be slightly reduced at the high level, but the range is limited, and the magnesium price will remain high. As far as the downstream is concerned, considering that there is still demand from foreign customers, users may make appropriate purchases during the correction of magnesium prices, but as a whole, they will mainly wait and see. In the short term, magnesium prices will continue to operate at a high level. If new policies on energy consumption are introduced, magnesium prices may be adjusted accordingly.

Supply side

According to preliminary statistics from the China Nonferrous Metals Industry Association, from January to August, China produced a total of 553600 tons of raw magnesium, an increase of 1.43% over the same period last year. Of this total, Shaanxi produced 381900 tons, up 7.31 percent over the same period last year; Shanxi produced 78300 tons, up 1.05 percent over the same period last year; and Ningxia produced 15200 tons, down 50.99 percent from the same period last year.

On the export side

According to statistics from the General Administration of Customs, from January to August, China exported a total of 306000 tons of magnesium products, an increase of 20.81 percent over the same period last year; the cumulative amount was 887 million US dollars, an increase of 48.16 percent over the same period last year. Of these, magnesium ingots exported 172900 tons, up 27.51 percent over the same period last year; magnesium alloy exports totaled 76300 tons, up 21.11 percent over the same period last year; and magnesium powder exports totaled 49300 tons, up 10.04 percent over the same period last year.

Related industries

Ferrosilicon market

In the ferrosilicon market, in September, the dual control of energy consumption has been continuously upgraded, and the confidence in the ferrosilicon spot market has continued to strengthen in the near future. However, due to the excessive price increase in the main producing areas and the fact that the actual output in some areas is not as affected as expected, the market has revised the expectation of supply-side reduction. In the case of the continuous upgrading of double control of energy consumption in various places, the production of ferrosilicon has been greatly reduced, and the supply pressure of ferrosilicon in the whole country continues to increase. At the same time, the volume and price rise of steel moves in October will form a strong support for the short-term spot price of ferrosilicon. As of September 29th, the spot price in Ordos, Inner Mongolia is 16800 yuan / ton, Zhongwei in Ningxia is 16500 yuan / ton, and Wuhai in Inner Mongolia is 16850 yuan / ton.

Downstream market

In terms of the steel market, according to the latest report released by the Wulian Iron and Steel Logistics Committee, the PMI of China's iron and steel industry was 38.1% in September, down 6.9% from the previous month to the lowest level since March 2020. From a sub-index point of view, output, finished material inventory, domestic raw material procurement, and new orders fell sharply this month, and the ex-factory price index rebounded sharply. At the same time, the backlog order index rebounded slightly, indicating that the development of the domestic iron and steel industry slowed down in September, mainly due to the tightening of production limits in policies such as flat control of crude steel production and double control of energy consumption, leading to a substantial tightening of iron and steel production and a passive decline in orders. Specifically, in September, Jiangsu, Guangxi, Zhejiang and other places further promoted the landing of the double control policy of energy consumption, and iron and steel production enterprises concentrated on the measures of limiting production and reducing production. In the case of a sharp contraction in market supply in the short term, the merchants were in a positive mood. As a result, steel prices also opened a concussion and higher trend, and it is expected that there may be room for a phased rebound in steel supply in October, but the overall operation will still be low.

In terms of sponge titanium market, the market price of upstream raw materials titanium tetrachloride and titanium slag is high and stable, and the cost pressure of sponge titanium production enterprises is increasing, which provides a strong support for the strong market quotation of sponge titanium. At the same time, sponge titanium downstream of the military industry, aviation market demand is stable, enterprise demand is good, market supply and demand is relatively stable, after the late Mid-Autumn Festival by the impact of magnesium ingots rose sharply, sponge titanium manufacturers cost upside down seriously, has suspended external quotations, the industry wait-and-see mood is strong, the sharp rise in magnesium prices on the sponge titanium, and its downstream titanium ingots, titanium materials market far-reaching impact.

In the aluminum market, due to double control of energy consumption and power shortage and other reasons, electrolytic aluminum enterprises in many areas have reduced production. According to SMM research, as of late September, China has reduced production or explicitly requested a reduction of electrolytic aluminum production capacity of 2.86 million tons per year, involving provinces including Yunnan, Inner Mongolia, Guangxi, Xinjiang, Henan, Guizhou and other provinces and regions, with the further expansion of the scale of production reduction. Aluminum prices are still easy to rise and difficult to fall, maintain bullish thinking in the last week before the National Day short holiday, pre-holiday reserve demand to increase or support aluminum prices, aluminum prices are still likely to rise, it is expected that the spot market A00 aluminum prices may hover around 23000 yuan / ton.