Magnesium Prices Decline Weakly [SMM Analysis]

This month's magnesium market continued to operate under pressure. As of the time of writing, the mainstream transaction prices of 99.9% magnesium ingot in major production areas were 15,400-15,500 yuan/mt, down by 600 yuan/mt compared to the beginning of the month. Market sentiment remained bearish.

At the beginning of the month, after the holiday, magnesium plants were cautious in their quotations, and magnesium prices mainly remained stable. Downstream replenishment proceeded in an orderly manner, with market transactions still focusing on just-in-time procurement. Downstream acceptance of high prices was low, and the transaction prices of 99.9% magnesium ingot showed no significant fluctuations. Subsequently, some magnesium plants' quotations fluctuated downward. In mid-month, influenced by procurement from traders and domestic downstream customers, inquiries recovered, and concentrated procurement provided demand support for magnesium prices, which overall remained stable.

At month-end, due to the continuous decline in raw material prices combined with financial constraints at magnesium plants, magnesium prices were under downward pressure. To alleviate financial pressure, magnesium plants continuously lowered prices to stimulate downstream procurement. However, excessive price concessions failed to effectively ease financial pressure and instead led to an unimpeded and sharp decline in magnesium prices, intensifying panic sentiment among industry participants.

Reflecting on this month's magnesium price trends, one cannot help but wonder: despite strong year-end futures transactions and effective inventory pressure relief, why did magnesium prices continue to decline after the holiday?

We can summarize four reasons: First, the continuous decline in coal prices drove down semi coke prices, exacerbating financial pressure on magnesium plants and reducing their sentiment to stand firm on quotes. Second, the post-holiday decline in raw materials such as coal and dolomite weakened cost support for magnesium ingots. Third, domestic trade demand was weak, and alloy demand recovery was slow, lacking support from the demand side. Fourth, the cessation of acquisition and storage activities heightened pessimism among industry participants.

In summary, due to the continued sluggishness in raw material prices, market confidence remained insufficient, and the consumption of initial inventory required time. Therefore, before demand recovers, magnesium ingot prices face downward pressure. However, as demand gradually recovers and supply-side production halts and maintenance occur, the gradual reduction in magnesium ingot inventory is expected to restore market confidence in magnesium prices.