Baowu Magnesium: There will be no cost inversion due to the cost advantage of primary magnesium

Although magnesium prices faced downward pressure recently, Baowu Magnesium, which has continued to receive good news, rose for five consecutive days in the A-share market on Jan 29th. As of 9:35 a.m. on Jan 29th, Baowu Magnesium was trading at 17.01 yuan/share, up 1.01%.

Baowu Magnesium recently responded to a series of issues that investors were concerned about. When asked, "Has a patent been applied for for hydrogen storage magnesium pills made from special magnesium ingots? What is the feedback from trial companies? Are there any orders?" Baowu Magnesium responded on January 26: The company's hydrogen storage magnesium pills meets the requirements on the client trail, and we are already negotiating for follow-up orders and reaching an intentional cooperation.

According to customs statistics, the export volume and value of various magnesium products in 2023 declined MoM and YoY. How much impact will it have on the company? What do you think of 2024? Baowu Magnesium Industry responded: The company’s exports of magnesium products in 2023 increased slightly compared with 2022.

Asked whether magnesium-based hydrogen storage can be used for energy storage in solar PV power plants? Baowu Magnesium Industry responded: Magnesium-based hydrogen storage can be used for energy storage in solar PV power stations.

Primary magnesium price has been at a low level recently (around 20,000 yuan/mt). Is there any cost inversion in the company? What are your thoughts on magnesium prices in 2024? How much impact will it have on the company's production targets and production and labor rates? What is the most reasonable range for magnesium prices? What kind of range of companies will benefit the most? Baowu Magnesium responded: Primary magnesium price is currently around 20,000 yuan/mt. The company’s primary magnesium has technical and cost advantages, and there will be no cost inversion. It is more beneficial to the promotion and application of magnesium if the magnesium price remains below 1.3 times the aluminium price. It can not only promote the development of downstream applications, but also have profit margins on magnesium alloy products due to the company's cost advantage.

Looking back at the average price trends of SMM magnesium alloy AZ91D and magnesium ingot 9990 (Fugu, Shenmu) in 2023, it is not difficult to see that their price trends in 2023 are basically the same. Taking the average price of magnesium ingots 9990 (Fugu, Shenmu) as an example, the magnesium ingots price fluctuated frequently in 2023, somehow hindering the widespread application of magnesium ingots downstream. The main reasons for the frequent price fluctuations of magnesium ingots are: first, the production capacity of raw magnesium companies in the main production areas is equivalent, and there is a lack of leading companies to lead market prices. Magnesium price fluctuations reflect the collective will of magnesium plants to a greater extent. Second, magnesium factories in the main production areas are relatively concentrated, and market news spreads very quickly.

Affected by low orders, domestic downstream companies have completed stockpiling ahead of schedule. Coupled with sluggish overseas demand, magnesium prices continue to fall. From the perspective of supply and demand, the current price of magnesium ingots is close to the cost line, and the willingness of magnesium plants to continue to offer shipments has weakened; most downstream companies have basically completed their stockings. It is expected that subsequent transactions in the magnesium market will be dominated by rigid demand purchases, and taking into account logistic suspension, the market activity will continue to decline before the CNY holiday. Therefore, magnesium prices are expected to remain stable.