Demand recovery, production costs to limit downsides in magnesium ingot prices

SHANGHAI, Mar 2 (SMM) – Prices of magnesium ingot edged lower last week as more than half of downstream producers remained shut on some existing curbs for operation resumption. The downside room in magnesium ingot prices, however, will be capped as upstream producers face higher costs of coal and demand will gradually pick up on eased COVID-19 impact. 

Transactions of magnesium ingot improved slightly last week with active enquiries but limited purchases in the market as downstream buyers hesitated on high prices. Magnesium ingot with a grade of 99.95% accounts for the majority of purchases, which were made mostly by titanium sponge producers. 

Some 80% of magnesium ingot producers in Wenxi, Shanxi province and Fugu, Shaanxi province have resumed more than 80% of their capacity, a SMM survey showed as of February 28. Only a handful of producers held operating rates below 50%. Relatively stricter controls on production in Shenmu of Shaanxi to contain the spread of COVID-19 kept workers from returning to work and depressed operating rates of local magnesium ingot plants below 30%. The situation is expected to last for a period of time. 

Limited availability of coal and silicon iron has caused a significant impact on the production of magnesium ingot, according to most magnesium producers. Coal supply in Shaanxi has barely recovered and this lifted prices of local coal prices by 100 yuan/mt from the normal levels as of February 28. 

On the downstream front, producers of magnesium powder and alloys did not show any significant progress in resumption last week on the back of continued official restrictions amid virus outbreak. Producers that had restarted work kept operating rates at low levels on manpower shortage, and some downstream mills scaled back the use of magnesium ingot as the prices stayed at highs.

SMM assessments showed that offers of magnesium ingot with a grade of 99.9% in Fugu stood at 14,800-15,000 yuan/mt as of February 28, with the traded prices at 14,700-14,800 yuan/mt ex-works. Quotes and ex-work traded prices of magnesium ingot in Wenxi stood mostly at 15,000-15,200 yuan/mt as of February 28.