Supply Reduction Takes Effect, Downstream Demand Improves, Magnesium Prices Recently Rise Nearly 4%—What Will the Market Do Next? [SMM Commentary]

SMM March 12 News:

With production cuts among magnesium producers on the supply side showing results, and on the demand side, the arrival of the traditional peak consumption season driving increased procurement in foreign trade channels and downstream applications of the magnesium industry chain, coupled with the relatively stable prices of raw materials such as coal and ferrosilicon providing cost support for magnesium ingot prices, magnesium prices have risen for three consecutive trading days recently.

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Price:

According to SMM quotations, on March 12, SMM magnesium ingot 9990 (Fugu, Shenmu) was quoted at 15,600-15,700 yuan/mt, with an average price of 15,650 yuan/mt, up 600 yuan/mt or 3.99% from the previous low of 15,050 yuan/mt on March 7. However, based on the trading situation on March 12, downstream acceptance of magnesium prices declined after three consecutive trading days of price increases. The trading volume in the spot market on the 12th decreased compared to the previous two trading days.

Production:

Magnesium Ingot Production: According to SMM data, China's magnesium ingot production in February 2025 decreased by 4.6% MoM. The main reasons for the production decline in February were: first, the dual impact of supply surplus and weak demand led to a continuous decline in magnesium ingot prices over the past three months. When prices fell below the break-even point for smelters, they were forced to cut production or halt operations. Second, fewer working days also contributed to the reduction in total magnesium ingot production.

At the end of February, due to the continued decline in raw material prices and financial constraints faced by 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 unstoppable price plunge, intensifying panic sentiment in the industry. Given the current excessively low magnesium prices and severe losses for magnesium plants, occasional production cut news emerged. It is expected that magnesium ingot production will decrease in March.

Magnesium Alloy Production: SMM data shows that China's magnesium alloy production in February 2025 decreased by 23.6% MoM, with a significant decline in the operating rate of magnesium alloy enterprises. The stabilization of upstream magnesium ingot prices eased the "rush to buy amid continuous price rise and hold back amid price downturn" sentiment caused by raw material price fluctuations. Additionally, downstream die-casting plants and 3C manufacturers stockpiled as needed before the holiday, stabilizing market sentiment. However, later, due to the earlier-than-usual Chinese New Year holiday for magnesium alloy die-casting plants, some magnesium alloy plants experienced a decline in orders, leading them to follow end-users in taking early holidays. The operating rate of downstream plants decreased. Around the Chinese New Year holiday, as downstream die-casting and 3C manufacturers gradually shut down, the stagnation in demand prompted some magnesium alloy enterprises to lower their operating rates to avoid inventory buildup. With downstream enterprises resuming operations, magnesium alloy production is expected to recover in March.

Outlook:

After a period of substantial trading, downstream restocking has slowed, and some end-users have indicated that they have completed their stockpiling. The upward momentum for magnesium prices may be limited in the near term. However, considering that destocking pressure on the magnesium ingot supply side has eased, and the previous strong trading performance has significantly alleviated inventory and financial pressures for magnesium smelters, their sentiment to stand firm on quotes remains strong. It is expected that magnesium prices will remain stable in the near term amid the tug-of-war between upstream and downstream players. SMM will continue to monitor subsequent changes in spot trading.

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