[SMM Analysis] magnesium ingot exports reduced supply and demand imbalance in the second quarter and prices fluctuated downwards.

SMM7 March 17: the spot price of magnesium ingots in China in the second quarter of 2020 was 13105.9 yuan / ton in Fugu area and 13414.4 yuan / ton in Wenxi area, down 5.5% from the previous month and 20.7% from the same period last year.

The price of magnesium ingots in China has dropped sharply since April 2020. The outbreak of the international epidemic has had a great impact on the export of China's magnesium products, both raw materials and downstream processed products. Magnesium ingot manufacturers in Fugu region said that the export orders of most downstream traders since mid-April have been delayed. The export situation of magnesium powder and magnesium alloy downstream is also not very optimistic. according to SMM research, more than 90% of magnesium powder and magnesium alloy factories said that export orders after mid-April were all delayed, so that the downstream demand for rigid magnesium ingots also decreased significantly. The sales of domestic magnesium are mainly in the lower reaches of the country, and the market quotation and transaction are chaotic. Many manufacturers reduce prices to withdraw funds or reduce inventory pressure, so they gradually lower the market price. After mid-April, the upstream took the initiative to reduce production and control production in order to find a balance between supply and demand in the market as a whole, which formed a certain supporting effect on prices and temporarily stopped the downward trend. According to SMM, more than 30% of magnesium ingot manufacturers began to limit production in April, and the limit was about 10% of normal output. However, due to the overall reduction of exports affected by the overseas epidemic by about 40%, the magnesium ingot market is still in excess of demand, and prices lack the incentive to rise, so it remained stable until May after a small shock.

After May Day short holiday, the price of magnesium ingots in China continued to rise. At the end of April, the Ministry of Transport announced that tolls will be resumed on highways across the country from 00:00 on May 6, and some downstream enterprises of magnesium ingots are considering reducing transport costs, so they purchase in advance, so there is a small peak of transactions in the market for a short time, and prices go up with it. After the May Day holiday, as most of the upstream producers of magnesium ingots in China have reduced production and limited production, there is a large number of centralized purchases in the lower reaches before the festival in order to reduce transportation costs, so the overall upstream inventory is not much. The downstream processing plants that have not completed the purchase before the festival continue to prepare goods, and the market continues to have transactions, forming a certain support to the price, so the market price has been showing an upward trend. By mid to late May, due to the rise in prices in the early stage, the psychological price gap between the upstream and downstream gradually reflected, and most downstream factories mainly digested existing inventory, so the market turnover was light, and in the absence of downstream demand, magnesium ingot prices began to decline, but the rate of price reduction was slow and the rate of decline was small, it can be seen that the upstream strike price attitude is firm, so it has basically remained stable until late May. At the end of May, due to the expansion of the demand for ferrosilicon in the bidding of downstream steel mills, the price of ferrosilicon increased by 100 yuan per ton, the production cost of magnesium ingots also increased accordingly, and the upstream inventory pressure was not great, so the price rose slightly.

The spot price of magnesium ingot is relatively stable in June as a whole. In mid-early June, the price of magnesium ingot is stable, but the overall trading volume of the market is not large, it is still dominated by downstream demand, the export situation has not improved, and the overall demand for magnesium ingot has shrunk. As a result, prices lack the driving force to rise. The psychological price downstream is generally low, and there are many cases of price depression. according to magnesium ingot manufacturers in Fugu area, some demand downstream gives a purchase price of 13000 yuan / ton, but the upstream price is firm and refuses to sell below 13050 yuan / ton. therefore, the difference in psychological price also affects the transaction to a certain extent. In late June, as coal prices also began to rise due to the contraction in upstream supply, the price of 75 ferrosilicon also rose to 5800 yuan / ton. Affected by the rising prices of ferrosilicon and coal, upstream magnesium ingot factories began to raise magnesium ingot prices due to cost pressure. The rise in prices has a certain stimulating effect on downstream demand, superimposed near the Dragon Boat Festival holiday, some downstream also began to stock, so the trading volume has increased, but the increase is limited, the overall demand is still weak.

According to SMM analysis, the overseas epidemic situation had a great impact on China's magnesium ingot market in the second quarter, because more than 50% of magnesium ingots and downstream magnesium products have to be digested by exports. although the upstream has actively restricted production and guaranteed prices since the end of April, it is not strong, and the market supply and demand has been out of balance for a long time. According to SMM research, the inventory of magnesium ingot factories in Fugu area is about 30, 000 tons, and the inventory of traders in Wenxi area is also 3, 000, 000 tons, so the social inventory pressure is greater, and it will be more difficult for magnesium ingot prices to rise in the future.