SHANGHAI, Nov 22 (SMM) - Domestic magnesium price has been under pressure and dropped. Compared with two weeks ago when the market was stable, the magnesium price quickly fell below 24,000 yuan/mt last week. Some transactions were even made at a low of 23,700 yuan/mt, and there was a strong bearish sentiment both from the supply side and the demand side. Some overseas terminal players said that the futures quotations of some domestic and foreign traders continued to decline. The magnesium prices are still facing relatively significant downward pressure.
From the perspective of supply and demand, according to SMM research, domestic magnesium ingot output in October was slightly lower than the annual average level of 78,000 mt. The year-to-date output added 29% year-on-year, and the domestic supply level this year maintained a high growth compared with last year. Correspondingly, the growth of exports, one of the main driving force for magnesium ingot demand, has been relatively weak. The exports totalled 210,000 mt from January to September, an increase of 8.75% YoY. Coupled with the impact of macro factors such as the pandemic situation, domestic demand remained weak, keeping magnesium market oversupplied. The bargaining power of the upstream players has been greatly weakened, and the price trend of magnesium this year has shown a downward trend in stages.
Under the environment of oversupply, some companies expressed optimism over traditions seasonal high in November and December. However, judging from the current market performance, the development of the magnesium market is not going towards the direction people have expected, and the price of magnesium has dropped below 24,000 yuan/mt partly due to the sluggish downstream demand. “Although orders in November have improved compared with October, they are far from the same period in the same period, and there are even signs of further deterioration in demand. The competition among peers has made the prices of orders in hand much lower than the current spot market price, and the risk of exporters’ forward transactions will further increase in the future.” A large trader said.
As for whether the follow-up demand can improve, SMM believes that due to the substantial increase in domestic magnesium ingot supply this year, it is unlikely to reverse the situation of oversupply in the fourth quarter alone under the influence of the overseas energy crisis and the domestic pandemic situation. Considering that following a big market last year, magnesium factories have relatively sufficient money, and the possibility of magnesium prices falling below the break-even point due to inventory pressure is relatively low. It is expected that subsequent magnesium prices will keep rangebound, and SMM will continue to pay attention to subsequent changes in market transactions.
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