Magnesium Market Remained Stable During the CNY Holiday

[Maintenance Drives Supply Contraction, Magnesium Market Inventory Diverges with Weakness] This week, domestic primary magnesium enterprise operating rates pulled back, with multiple smelters initiating maintenance and production cuts. Short-term raw material supply contracted somewhat, and production is expected to remain at low levels going forward. Inventory showed clear divergence, with smelter plant inventory edging higher. Despite maintenance reducing output, suppliers in the market dumped goods at low prices, and procurement orders flowed more toward circulating social inventory, causing passive inventory buildup at plants. Social inventory shifted to destocking, as traders took advantage of market conditions to clear earlier low-priced stockpiles. Downstream buyers exhibited notable fear of high prices, with procurement limited to rigid demand and no concentrated stockpiling activity. The continuous release of low-priced supply weighed on prices, compounded by the market's rush to buy amid continuous price rise and hold back amid price downturn mentality, leaving magnesium prices under pressure in the short term.

【SMM Magnesium Weekly Review】 This week, the supply structure of dolomite sources has diverged: high-quality local ore sources in Wutai remain persistently tight, and enterprises have procured from other provinces for replenishment, resulting in overall sufficient supply and stable prices. Driven by sharp fluctuations in coal prices, magnesium ingots in major production regions saw a trend of first rising then falling: at the start of the week, raw material hikes pushed magnesium prices to a peak, but downstream customers reduced purchases out of fear of high prices; coupled with the subsequent decline in coal prices, magnesium ingots gave back all their earlier gains. Foreign trade FOB quotations edged down slightly along with domestic prices, overseas orders fell short of expectations, the "Golden September and Silver October" demand failed to materialize, and traders showed strong wait-and-see sentiment. Downstream magnesium powder and magnesium alloy are under simultaneous pressure: magnesium powder fluctuates in line with magnesium ingots, processing fees are under pressure, and downstream players only maintain inelastic demand; magnesium alloy is in a situation of weak supply but even weaker demand, with die-casting plants seeing declining operating rates, rising inventories and weakening processing fees. On the whole, the magnesium industry chain this week is mainly disturbed by coal costs, with no substantial recovery in terminal demand and a lack of strong support across the industry, maintaining a weak oscillating pattern in the short term.

【SMM Weekly Magnesium Cost Briefing】From September 4 to September 10, the average production cost of magnesium ingots in Shaanxi province stood at RMB 16,084 per ton, down by around 6.1% week on week. The decline in cost was mainly driven by the drop in prices of raw materials. In terms of profits, the average profit of the industry this week came in at RMB 3 per ton, marking an overall turnaround from losses to profits, yet the profit margin is extremely thin, basically hovering around the break-even line, with an average profit margin of 0%. On the whole, the cost of magnesium ingots has dropped significantly this week. Affected by the falling magnesium prices, the recovery of industrial profits remains limited, and most manufacturers are still on the verge of slim profit or loss. The short-term cost support has somewhat weakened, thus continuous attention should be paid to the price trend of raw materials and the recovery of downstream demand.