Mixed Bullish and Bearish News in the Market: How Will the Market Perform in the Future? [[SMM Analysis]]

In Q1 2025, China's primary magnesium production reached 228,000 mt, down 9.3% YoY, while magnesium ingot production was 203,000 mt, down 8.7% YoY.

The situation of strong supply and weak demand improved effectively, and magnesium prices rebounded in a "V" shape in Q1.

With the deepening of the magnesium ingot reserve action, the trend of increasing inventory among magnesium ingot producers was effectively curbed, and the supply-demand imbalance in the market was reversed. Meanwhile, downstream customers actively stockpiled, and nearly half of the magnesium ingot producers in the main production areas sold their production volume for the Chinese New Year in advance, alleviating the inventory and financial pressure on magnesium smelters. In January, magnesium ingot prices stabilized at around 16,000 yuan.

By early February, after the Chinese New Year, the market reopened, and magnesium smelters began to offer tentative prices, while downstream customers generally remained cautious, with strong market sentiment of wait-and-see, and magnesium prices remained stable. However, by the end of February, affected by the sharp drop in raw material coal prices, cost support weakened, and magnesium prices began to decline again, with a drop of 6.3% in this round. The industry's bearish expectations for magnesium prices accelerated the decline, faster than the drop in costs, and the operating pressure on magnesium smelters gradually increased, forcing them to spontaneously reduce operating rates, leading to a slight MoM decrease in primary magnesium production in February.

In early March, magnesium prices fell to the psychological expectations of downstream enterprises, prompting traders to engage in concentrated procurement, resulting in tight spot supply in the market and a jump in magnesium prices.

Outlook

In April, the rise in magnesium prices allowed some magnesium plants to turn losses into profits, and magnesium smelters that had previously stopped for maintenance gradually resumed production. However, more magnesium plants underwent maintenance and rectification due to strict inspections by the environmental protection inspection team on magnesium slag solid waste storage sites, leading to a decline in primary magnesium production in April. Entering May, the central environmental protection inspection team will be stationed in Fugu, Shaanxi, the main production area of magnesium ingots, and environmental protection policies may continue to have an unstable impact on the magnesium ingot market. However, according to feedback from magnesium ingot producers, magnesium smelters that had been rectified due to magnesium slag issues have completed their rectification and plan to resume production in early to mid-May, with primary magnesium production expected to increase slightly MoM.

In Q2 2025, magnesium ingot production is expected to maintain an upward trend, and magnesium ingot spot supply will enter an inventory buildup mode. The upward resistance for magnesium ingot prices remains strong, but considering that magnesium ingot inventory is still below the warning line, the bottom of magnesium prices has support. It is expected that magnesium ingot prices will fluctuate rangebound between 16,000 and 17,000 yuan/mt in Q2 2025.