SMM analysis on China June magnesium industry chain output and July forecast

Magnesium ingot

According to SMM, China's magnesium ingot production in June was 71,796 mt, down 1.8% MoM.

In June, magnesium ingot producers generally maintained normal production, but the market focus shifted back to the operating rates of producers in the major production area due to the strong supply and weak demand. The soaring ocean freight caused overseas customers with non-rigid demand to delay their magnesium ingot purchases. In the domestic market, as high aluminum prices increased inventory pressure on downstream aluminum billet plants. Inhibited by high prices, these plants chose to cut production to reduce aluminum billet output, leading to a decrease in magnesium ingot demand. High coal and ferrosilicon prices elevated the cost of magnesium ingots, squeezing the profit margins of magnesium producers and increasing production pressure. Additionally, higher temperatures worsened labor conditions, prompting some companies to schedule maintenance to reduce magnesium ingot supply.

The magnesium market showed a weak trend. The domestic downstream and end-user demand was sluggish, with small-volume transactions based on rigid demand. In addition, with the subdued demand caused by overseas summer holidays, the magnesium market is expected to remain weak in July. Some magnesium ingot producers plan to undergo maintenance to reduce supply. However, considering that some producers just resumed production at the end of last year and some conducted maintenance in April, the number of producers scheduling maintenance is expected to be limited, leading to relatively ample magnesium ingot supply. SMM expects July magnesium ingot production to remain stable at around 70,000 mt.

Magnesium alloy

According to SMM, China's magnesium alloy production in June was 33,000 mt, up 28.5% YoY.

In June, the operating rates of downstream processing producers performed well. The aluminum prices were high while magnesium ingot prices fluctuated at low levels, significantly highlighting the cost-effectiveness of magnesium alloy, leading to a slight improvement in orders. Major magnesium alloy producers operated at full capacity, resulting in a 2.6% MoM increase in production. Downstream and end-user die-casting plants made purchases as needed. SMM expects that magnesium alloy production in July will remain stable at 33,000 mt.

Magnesium powder

According to SMM, China's magnesium powder production in June was 5,859 mt, down 3.8% MoM but up 24.1% YoY.

Due to the sluggish orders and a strong wait-and-see sentiment among downstream companies amid price fluctuations of magnesium ingots, the production of magnesium powder fell. A representative from a large magnesium powder producer stated that the profits of steel mills were thin due to weak domestic economic situations, and the frequent price changes of magnesium ingots made downstream procurement more cautious. Considering that low-price magnesium ingots may stimulate an increase in magnesium powder orders, SMM expects domestic production of magnesium powder in July to remain at 6,000 mt.