Magnesium ingot production in July increased by 4.7% MoM. Amid strong supply and weak demand, magnesium prices frequently faced resistance in their upward trend [SMM Analysis]

According to SMM data, China's magnesium ingot production in July 2024 was 75,153 mt, up 4.7% MoM.

In July, the production of magnesium ingots showed a slight upward trend. In July, there were both increases and decreases in production among smelters in the magnesium ingot market. The reasons for the decrease in magnesium ingot production are as follows: First, the normal maintenance of magnesium ingot smelters during the summer, with a total of three magnesium ingot smelters undergoing maintenance, impacting production by less than 3,000 mt. Second, various factors such as overseas summer holidays and sluggish end-user demand led to low operating rates among magnesium ingot customers, resulting in insufficient market transactions and continuous inventory buildup. Additionally, the market price of magnesium ingots was close to the breakeven point for many producers, with some even operating at a loss, prompting some producers to cut production to control the increasing inventory. The reasons for the increase in magnesium ingot production in July are as follows: First, the smelters that had halted production for maintenance in May and June gradually resumed production, leading to an increase in supply. Second, some producers adjusted their daily production based on their orders and inventory levels.

Recently, magnesium prices have been slightly rising, but due to bearish sentiment in the industry, the willingness to accept high prices is low, and the overall increase is limited. The Chinese magnesium ingot market is showing a stalemate between supply and demand. Due to sluggish downstream demand and the disproportionate risk to income in market operations, magnesium ingot trading companies have low stocking intentions. Additionally, the market lacks supportive factors, leading to strong bearish sentiment among industry insiders, resulting in insufficient momentum for magnesium ingot price increases. On the other hand, considering that current magnesium ingot market prices are close to the breakeven point for various plants, smelters are not willing to lower prices. It is expected that magnesium ingot prices will move rangebound in August.

According to SMM, two magnesium ingot smelters will carry out maintenance plans in early August, and a total of four smelters are scheduled for maintenance in August. Considering that the smelters that underwent maintenance in July have resumed full production, it is expected that magnesium ingot production will stabilize at 75,000 mt in August.