Magnesium Prices Accelerated to Drop amid Sluggish Terminal Demand

SHANGHAI, Jul 20 (SMM) - Contrary to the current high temperature, the magnesium ingot market encountered a cold wave entering July with terminal demand staying sluggish. As of this Tuesday, the mainstream transaction prices of magnesium ingot 9990 stood at around 23,800 yuan/mt, down nearly 1,000 yuan/mt from the beginning of the month, a strong evidence of the current seasonal low.

Affected by overseas summer break, export orders are at a low level. In terms of domestic trade, due to the weakening demand, magnesium powder and magnesium alloy enterprises have signs of production cuts. For aluminium plants, they have slowed their purchases of magnesium ingot amid the dilemma caused by poor orders from downstream sectors. Some industrial players even said that there has been barely any seasonal high against the current off-season. And falling magnesium prices also put the buyers on the sidelines.  

Misfortune is always accompanied. In the case of weakening demand, dropping ferrosilicon and semi-coke prices put further pressure on magnesium prices. According to market feedback, 72 ferrosilicon natural lump prices have dropped by more than 1,000 yuan/mt from a month ago to 7,700 yuan/mt, and the bid prices of steel mills also fell 1,100-1,300 yuan/mt. The lack of cost support further pulled back magnesium prices.

SMM believes that, as the demand and cost is both weakening, magnesium manufacturers have to reduce the production for maintenance. But taking into account the different scale of manufacturers that lead to a large difference in financial strength, there will always be those who will lower the sales prices in order to improve the cash flow, pulling down magnesium prices as a whole. Currently speaking, magnesium prices are under great pressure, and are likely to fall in the near term.