Monthly Review of the Magnesium Market: Magnesium Ingot Costs Continue to Rise, What Lies Ahead?

In May, magnesium prices steadily increased, showing an upward trend overall. As of May 30, the mainstream transaction prices for 90 magnesium ingots in the main production areas were 18,500-18,700 yuan/mt, up 550 yuan/mt from the beginning of the month.

At the beginning of May, after the holiday, magnesium plants were mostly cautious, continuing the strong magnesium market trend from before the holiday. The mainstream quotations in the main production area for 90 magnesium ingots were around 18,000-18,100 yuan/mt. A representative from a large trader stated that downstream concentrated procurement at 18,000 yuan/mt, and the sentiment of reluctance to sell among magnesium plants intensified, causing magnesium prices to rise steadily.

From mid to late May, the supply-demand stalemate gradually became apparent. Weak market demand led to a lack of upward momentum for magnesium prices, while the high prices of ferrosilicon and coal significantly increased industry cost pressures, limiting the room for magnesium ingot producers to lower prices. Magnesium prices fluctuated between 18,300-18,400 yuan/mt and 18,500-18,600 yuan/mt in mid and late May, respectively, maintaining a stable trend. The overall magnesium market showed a pattern of long-term stable prices followed by a slight decline and then a rapid rise. Supported by costs, the willingness of magnesium ingot producers to maintain stable prices increased, and magnesium prices continued to run stably. However, prolonged sluggish sales significantly increased the inventory pressure on magnesium ingot producers. To alleviate financial pressure, some magnesium plants gradually lost their willingness to maintain stable prices, leading to a weak downward adjustment in magnesium prices. Subsequently, downstream companies entered the market to purchase at lower prices, and under the guidance of demand, magnesium prices continued to rise to 18,800 yuan/mt.

Reviewing the magnesium price trend from January to May, the current market demand is mediocre. At certain times, concentrated procurement may cause a rapid rise in magnesium prices, but the downstream demand is insufficient to support a sustained increase. The sharp declines and surges are only short-term phenomena, and the market will eventually return to rationality. Therefore, magnesium prices mainly fluctuate narrowly around the cost line of magnesium ingots, influenced by supply and demand.

Raw material market: The State Council issued a notice on the "2024-2025 Energy Conservation and Carbon Reduction Action Plan," which states that "electricity price discounts for high energy-consuming industries are strictly prohibited." This is expected to be bullish for the ferrosilicon raw material, and the market sentiment for ferrosilicon is strong. The most-traded contract hit the limit during the session, closing at 7,824 yuan/mt, an increase of 8.01%. Some ferrosilicon plants have suspended quotations. According to SMM, the price of natural lump 75 ferrosilicon from a certain plant in the afternoon rose to 8,300 yuan/mt. Spot supply in the market is tight, and ferrosilicon prices remain strong. In the Fugu area, the price of small-sized semi coke is 955 yuan/mt. Supported by coal prices, the price of semi coke slightly increased.

SMM analysis indicates that with strong cost support and low inventory levels at magnesium ingot manufacturers, the short-term magnesium ingot market prices are expected to remain high. Considering that the soaring ocean freight in June may somehow impact the export volume of magnesium products, industry insiders are not optimistic about the market outlook for June. This is directly reflected in the attention industry insiders are paying to the maintenance plans of magnesium ingot smelting companies. However, with the expectation of a continuously strong material market, the downward space for the average price of magnesium ingots in June is expected to be limited.