Monthly Review of the Magnesium Market: Magnesium prices were under pressure and consolidating at low levels in July [SMM analysis]

Monthly Review of the Magnesium Market: July passed by, and looking back at the performance of the magnesium ingot market this month inevitably brings a touch of sadness. As of July 31, the mainstream transaction prices for 90 magnesium ingots in the main production areas were 17,850 yuan/mt, flat compared to the price at the beginning of the month, and down 2,400 yuan/mt compared to the price at the beginning of the year, a significant drop of 12%. As of August 3, the mainstream transaction prices for 90 magnesium ingots in the main production areas were 17,900 yuan/mt, down 850 yuan/mt compared to the beginning of the month. Industry profits have continued to be squeezed, even resulting in losses. After being under long-term pressure, the market urgently needs new vitality.

[July Magnesium Market Review] In July, magnesium prices showed a weak downward trend overall. At the beginning of July, due to traders fulfilling overseas orders, the magnesium market performed well, pushing the price of magnesium up slightly to 18,000 yuan/mt. However, the price of magnesium continued to decline, with smelters lacking confidence and downstream buyers only making rigid purchases, resulting in limited transactions. By mid-to-late July, the lowest transaction price for 90 magnesium ingots dropped to 17,600 yuan/mt. Some magnesium ingot producers, due to cost pressures, had limited willingness to cut offers, leading to a supply-demand stalemate and stable prices. In late July, thanks to concentrated purchases by downstream customers and the entry of capital into the market, the price of magnesium rebounded slightly to 17,850 yuan/mt.

[Magnesium Ingot Supply Status] Currently, magnesium ingot smelters are generally maintaining normal production, but the market's supply-demand relationship shows a tendency of oversupply, causing market attention to continuously focus on the operating conditions of smelters in major production areas. Weak demand in July led to a decline in magnesium prices, increasing production pressure. Additionally, rising temperatures worsened working conditions for workers, leading to the shutdown of three magnesium ingot smelters for maintenance in July, which is expected to impact monthly production by about 3,000 mt. These companies have now all resumed production. According to SMM's survey, four magnesium ingot smelters are expected to undergo maintenance in August, while one company will resume production. SMM will continue to follow up on the maintenance status of magnesium ingot smelters.

Domestic Market: In August, the domestic aluminium extrusion market remained sluggish. Despite a recent pullback in aluminium prices and a slight rebound in orders for some producers, the off-season demand remained weak, failing to significantly improve market sentiment. This week, the operating rate in the aluminium extrusion industry reached only 50.50%, up 0.50 percentage points WoW. By segment, construction extrusion was dragged down by weak end-user demand, resulting in low operating rates and order volumes. According to an SMM survey, although there is still some demand from urban village renovation projects, the slow collection of receivables has made producers cautious in taking orders. In the industrial extrusion sector, demand for photovoltaic extrusion remained stable, and orders for automotive extrusion slightly increased, driving up the operating rates of related producers. SMM will continue to monitor subsequent demand changes. Overall, although some segments have improved, boosting the overall operating rate this week, there is still a significant gap compared to earlier levels. In the context of the off-season, the market is unlikely to see substantial growth and is expected to remain stable in the short term.

Overseas Market: With the arrival of the hot summer, the overseas summer break has come as scheduled, and the overseas magnesium ingot market has entered the off-season. It is expected that magnesium ingot export volumes will remain at low levels.

[Magnesium Ingot Raw Material Situation] As of August 3, natural lumps of 75 ferrosilicon in Shaanxi were priced at 6,950 yuan/mt. End-users primarily restock as needed, and the overall market performance is moderate. Downstream stocking willingness is low, and market participants are cautious. Considering that the raw material semi coke prices stabilized, it is expected that the ferrosilicon market prices will maintain low.

Overall, the magnesium market prices face downward trend, with downstream end-user demand remaining sluggish and transactions mainly driven by rigid needs. Given the current supply-demand structure is unlikely to change rapidly, it is expected that the magnesium market prices will face downward trend in August. SMM will continue to monitor downstream demand and market transaction conditions.