SHANGHAI, Sept 27 (SMM) - At the Automotive Magnesium Alloy Materials Forum under the 2022 SMM China Automotive New Material Application Summit Forum, which was jointly organised by Shanghai Nonferrous Metals Industry Association, Shanghai Automotive Engineering Association, Suzhou Die Casting Technology Association and SMM, SMM Senior Analyst Liu Hao provided an in-depth analysis of the supply and demand trend of China's magnesium industry in 2022. Liu anticipated that the impact of the European energy crisis would continue to have a greater impact on the Chinese magnesium market in the fourth quarter. In addition, so far the domestic inventory has been higher than that in the same period of previous years, and thus the upward momentum of magnesium prices will relatively limited in the fourth quarter despite that it is the traditional peak season for magnesium ingots.
1. Review of China's magnesium products in 2022
In 2021, the increasingly definite energy consumption control policy pushed up the magnesium prices. However, the magnesium prices have been fluctuating downward in 2022. The decline in magnesium prices can be summarised in three phases.
First, magnesium prices faced downward pressure in January as enterprises finished the restocking for the Spring Festival holiday. In addition, the downstream demand weakened due to the previous enduring high prices of magnesium, and hence magnesium prices were down 6,500 yuan/mt or 13% compared with the end of 2021. Second, the prices of magnesium products slipped in March because benefits brought by the environmental protection policies faded. The weaker policy support dampened the market expectations, and the magnesium prices slid to 40,000 yuan/mt, a decrease of 5,500 yuan/mt or 12% from late February. Third, the magnesium plants lowered the magnesium prices in May-June amid rising inventory and sluggish demand. Basically, the magnesium prices fell below 30,000 yuan/mt in June, down 20% month-on-month.
2. Analysis of supply and demand of China's magnesium industry in 2022
Magnesium plants were enthusiastic about production thanks to bumper profits
According to SMM survey, the operating rates of domestic magnesium factories were high under the profit support. From January to August 2022, the total output of magnesium ingots in China stood at 650,000 mt, a year-on-year increase of 24.86%, and the average monthly output increased by more than 10,000 mt compared with last year. The average operating rate of domestic magnesium factories in 2021 was 61.78%, while that in January-August 2022 was 68.58%, an increase of 6.83 percentage points from the previous year.
Domestic trades shrank dramatically due to high costs of downstream enterprises
From January to September, the average price of magnesium alloys gained 78% compared with the same period in the previous year. Therefore, the high costs prevented downstream enterprises from promoting the application of magnesium alloys. SMM statistics showed that the monthly operating rate of domestic magnesium alloy enterprises in 2022 declined significantly compared with 2021. At the same time, the total output of magnesium alloys in China amounted to 210,000 mt during January and August 2022, a year-on-year decline of 16.4%.
Raw material prices trended higher under the impact of multiple factors
According to SMM statistics, the prices of main raw materials to produce primary magnesium trended higher under the impact of multiple factors. In particular, The thermal coal prices experienced increase, decline, rally and fluctuation within a narrow range in the first half year of 2022. It is expected that the coal prices under long-term orders in the second half of 2022 will move within a reasonable range in the second half of the year. Meanwhile, the coal prices in the spot market are estimated to rise amid tight supply. On the other hand, the supply of ferrosilicon was tight in the first half of the year due to strong demand from the non-steel sector. Accompanied with the changes in the ferrous prices, ferrosilicon prices mainly rose with bullish expectations.
Total exports of various magnesium products from January to August increased 12.77% year-on-year
According to SMM statistics, the export of magnesium industry continued to strengthen from 2020 to 2022. The total exports of magnesium products from January to August in 2020, 2021 and 2022 stood at 253,059 mt, 305,154 mt and 344,115 mt respectively.
China's magnesium ingot exports continued to rise in 2022
In the context of the volatile international situation, the overseas market had strong willingness to stock up. SMM statistics showed that from January to August 2022, the total exports of magnesium ingots from China stood at 190,000 mt, a year-on-year increase of 8.6%, and the monthly export volume was 2,000 mt higher than that in the previous year.
China's magnesium alloy exports also moved upward significantly in 2022
China exported 98,000 mt of magnesium alloys in January-August 2022, a year-on-year increase of 28.3%, and the monthly export volume increased by more than 2,700 mt compared with last year.
Domestic trades of magnesium alloys fell short of expectations
According to SMM survey, magnesium alloys took up 70% in the raw materials for automobiles, the main application field of magnesium alloys. However, due to the sharp fluctuations in magnesium prices this year, the application and promotion of magnesium alloys in automobiles was limited. The second largest application of magnesium alloys is 3C digital products, which instead flourished amid the higher demand for entertainment on mobiles and remote working caused by the resurging pandemic. Specifically, the share of magnesium alloys in 3C digital product application increased 4 percentage points on the year to 23%.
3. Outlook for China's magnesium industry in the fourth quarter of 2022
It is expected that China's magnesium product supply may remain high in the fourth quarter of 2022.
Magnesium ingot: At present, the profits of magnesium ingot plants are acceptable, but the European energy shortage has resulted in sluggish overseas demand. Therefore, magnesium plants are less likely to increase the output, and the supply of magnesium ingots is expected to be flat.
Magnesium powder: It is estimated that coal prices will run high in the upcoming winter, so the magnesium prices are unlikely to decline further. The high costs of downstream enterprises will result in weak demand for magnesium powder.
Magnesium alloys: Magnesium alloy production orders are relatively stable. The European energy crisis might lead to falling demand in the overseas terminal markets, and thus the magnesium alloy orders is anticipated to decline slightly in the fourth quarter.
Magnesium prices are expected to weaken in the fourth quarter, and the upward momentum of magnesium prices is limited
SMM believes that the impact of the European energy crisis will continue to have a greater impact on the Chinese magnesium market in the fourth quarter. In addition, so far the domestic inventory has been higher than that in the same period of previous years, and thus the upward momentum of magnesium prices will be relatively limited in the fourth quarter despite the traditional peak season.
![Lonjakan Batu Bara Memicu Pasar Magnesium, Konsolidasi Dua Bulan Akhirnya Terpecah, Pemangkasan Produksi dan Pengurangan Stok Menandakan Reli Berikutnya [Analisis SMM]](https://imgqn.smm.cn/usercenter/mLwgx20251217171723.jpeg)
