[SMM analysis] magnesium prices have fallen by 8% since the beginning of the year, but these factors can be followed by follow-up attention.

Since the beginning of this year, the price of magnesium has continued to decline until it has slowed down in recent days. as of January 28, the average price of SMM1# magnesium ingots (Fugu and Shenmu) was 14150 yuan / ton, down 1300 yuan / ton, or 8.4%, compared with 15450 yuan / ton at the end of December 30 last year. Previously, magnesium prices experienced a rapid rise from mid-November to the end of last year, rising to 15550 yuan / ton at one point, but fell back in 2021.

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Before September last year, the domestic spot price of raw magnesium remained in the doldrums. On October 13, the average price of SMM1# magnesium ingots (Fugu, Shenmu) fell to an all-time low of 12200 yuan / ton, and the cost upside down was serious. In November, as a major raw material, ferrosilicon prices remained strong and most coal mines in Yulin area were ready for production and sale, while coal prices in the region remained strong. After nearly half a month of adjustment, the magnesium factory inventory pressure is small and the magnesium collection policy of Yulin magnesium Group is gradually clear, which boosts the confidence of magnesium factories in the region, indirectly affects the spot market volume by adjusting shipments, and gradually grasps the market initiative. Downstream continues to buy enthusiasm, the market is gradually heating up, some traders are approaching the shipping date, in view of the unabated momentum of magnesium prices, decisive purchase. Affected by the buying sentiment, the rest of the wait-and-see downstream also entered the market one after another, prompting magnesium prices to rise rapidly.

At the end of November, it was reported that the production of ferrosilicon in Zhongwei area of Ningxia was limited to March, which led to the continuous limit of ferrosilicon futures, which in turn promoted a sharp increase in magnesium prices from the cost side. In addition, Yu magnesium Group and Fugu Factory basically reached a cooperation agreement to further strengthen the increase in magnesium prices. By mid-December, magnesium prices leveled off.

In terms of major events, on December 3, the Fugu magnesium Association and the Lanchan carbon Association held an emergency meeting, aiming at the rising prices of all kinds of raw materials produced by raw magnesium and coke powder (blue carbon, clean carbon), especially the price of raw coal, which makes the already high cost of magnesium production even worse, the production cost is seriously upside down from the sales price, the pressure of production and operation increases sharply, and the situation is grim. The meeting mainly discussed how to actively participate in the "reserve for sale" of Shaanxi Yulin magnesium Industry (Group) Co., Ltd.

By the end of December, some magnesium factories in Shaanxi began to plan to reduce the production of Lanchan carbon and magnesium ingot Synchronize by 35% because of environmental protection and high coal prices. It is reported that according to the "Emergency notice on the decisive Battle of the Blue Sky Defense Battle in the whole Province" (Shaanxi Government Office (2020) No. 35). The document calls for a province-wide "14-day decisive battle to win 41 micrograms of blue sky defense operations" from December 19 to 31. It is required that during this emergency response period, the combustion of bulk coal and biomass, the transportation of high-emission vehicles and earthwork should be strictly prohibited, and the measures of stopping production and off-peak production should be strictly implemented to minimize the intensity of pollution emission. Affected by this, the transaction price of magnesium shows a trend from weak to strong. Magnesium factory inventory orderly release, trading volume continues to improve, downstream early low-priced raw material stock is less, faced with replenishment demand, magnesium price to maintain a strong operation.

After entering 2021, due to the continued high magnesium prices, the bearish sentiment in the lower reaches intensified, coupled with New Year's Day's relatively sufficient stock, leaving more time for the lower reaches to wait and see. With the approach of the Spring Festival, the downstream gradually enters the stage of work stoppage and holiday, the market demand is gradually weakening, the market environmental demand is weak, the cost-side support is weakened, and the main influencing factors of price are tilted to the relationship between supply and demand. in the case of a reduction in transactions, there has been a slight correction in magnesium prices.

At present, in the magnesium market, according to SMM research, due to the concentrated delivery in the lower reaches two days ago, the market procurement volume increased, resulting in a slight rise in prices, today's downstream goods procurement basically ended, the overall demand returned stable, magnesium prices gradually stabilized. On the raw material side, ferrosilicon futures have been running weakly in the past two weeks, the local coal price in Yulin has continued to decline, the pressure on the cost side of the magnesium plant has been reduced, and with the approach of the Spring Festival, the situation of shutdown and production reduction in the downstream market will gradually increase, and the situation of weak demand will gradually appear. Taking into account the current magnesium factory inventory pressure is small, the recent market transactions are relatively stable, the magnesium market is expected to operate steadily in the near future, the specific trend of magnesium prices still need to observe the follow-up market transactions.