Baowu Magnesium Industry: Magnesium Alloy Ultra-large Integrated Auto Body Structural Parts Have Been Successfully Trial-produced, and Performance Testing is Being Conducted Jointly with Customers

On May 28, Baowu Magnesium Industry's share price rose. By the close of trading on the 28th, Baowu Magnesium Industry was up 0.35%, closing at 11.46 yuan per share.

When asked, "When will the magnesium structural components for ultra-large auto bodies be launched into the market? Are there any ongoing order negotiations and product deliveries for confirmed orders?", Baowu Magnesium Industry stated on its investor interaction platform on May 28 that:The company's magnesium alloy ultra-large integrated auto body structural components have been successfully trial-produced and are undergoing performance testing with customers.

According to Baowu Magnesium Industry, on May 23, Wang Qiangmin, Party Secretary and General Manager of Baowu Magnesium Industry, and Wen Faping, Deputy Party Secretary and Vice Chairman, along with their delegation, visited Anhui JAC Group Co., Ltd. for an exchange. Both parties engaged in in-depth cooperation discussions and officially signed a strategic cooperation agreement, jointly pressing the "accelerator" for innovative development in the automotive industry. Both parties will open up broader spaces for the widespread application of magnesium alloy materials in the automotive sector, vigorously promoting the automotive industry's accelerated advancement towards lightweighting and low-carbonization, and forging new brilliance in industry development!

When asked about the company's view on the relationship between magnesium and aluminum prices, the record of the institutional survey accepted by Baowu Magnesium Industry, as announced on May 14, indicated: As magnesium prices fall below aluminum prices, it presents a great opportunity for the magnesium industry and is more conducive to expanding downstream applications such as large components in vehicles, integrated die-cast magnesium alloy large components for automobiles, robots, and construction templates, further enhancing downstream customers' enthusiasm for using magnesium. Previously, we promoted magnesium applications from a performance perspective; now, we can promote them even more from a cost perspective.

When responding to inquiries about the company's operating performance in 2024, Baowu Magnesium Industry mentioned: In 2024, the company achieved operating revenue of 8,982,563,028.12 yuan, up 17.39% YoY, and net profit attributable to shareholders of the publicly listed firm was 159,628,962.00 yuan, down 47.91% YoY.This was mainly due to the impact of declining magnesium prices, which led to a decrease in the gross profit margin of magnesium materials and die-cast products, resulting in a year-on-year decline in the company's performance.

Regarding its business plan for 2025, Baowu Magnesium Industry stated in its 2024 annual report: 1. Fully promote the technological upgrading of primary magnesium smelting (1) Increase innovation in primary magnesium smelting process technologies to continuously reduce magnesium smelting costs. (2) Intensify exploration of green magnesium smelting process technologies and reserve new low-carbon magnesium smelting technologies. 2. Improve the layout of the magnesium industry chain and advance key project construction Improve the layout of the industry chain, optimize the pace of new capacity layout, position the entire process of the industry chain, advance key projects, and effectively reduce costs: (1) Partial commissioning of the Qingyang project, further optimization of the large-tank process to reduce primary magnesium costs; (2) Steadily advance the construction of the Wutai project with an annual output of 100,000 mt of high-performance magnesium-based light alloys and deep processing; (3) Partial completion of the Gansu Baomei Xitie project, further reducing primary magnesium costs through cost control of ferrosilicon. 3. Vigorously promote technological innovation in magnesium applications and advance magnesium market development (1) Achieve further breakthroughs in key magnesium product technologies and expand new demands for magnesium market applications Domestic market: Increase market promotion efforts in domestic automotive, 3C product, construction, and other sectors, establish long-term and stable cooperative relationships with customers, and further expand market share. International Market: Actively participate in internationally renowned exhibitions and industry conferences to showcase the company's technological strength and product advantages, and expand international customer resources. (2) Increase investment in research on magnesium functional materials for future applications, and explore new areas for magnesium-based material applications. 4. Optimize Existing Assets and Enhance Asset Return Levels (1) Strengthen Operations of High-Quality Assets: For high-quality existing assets with strong profitability and good market prospects, increase resource investment to enhance their operational management levels and further improve their income-generating capabilities. (2) Disposal of Idle Assets: Realize the liquidation or appreciation of idle assets such as real estate and equipment through leasing or sales to improve asset utilization efficiency. 5. Optimize Capital Structure and Control Asset-Liability Ratio (1) Reasonably Arrange Financing Scale and Structure: Arrange the proportion of long-term and short-term financing reasonably according to the company's specific circumstances; determine a reasonable financing amount based on the company's debt repayment ability and operational development needs. Reasonably adopt various financing methods, combining direct financing with indirect financing. (2) Strengthen Fund Management and Operational Efficiency: Accelerate the speed of fund collection and turnover to improve the operational efficiency of funds.

As Baowu Magnesium Industry stated during an institutional survey, influenced by the decline in magnesium prices, the gross profit margin of magnesium materials and die-casting products decreased, and the company's performance declined YoY.

Magnesium prices continued to fall throughout 2024. Taking the price of SMM magnesium ingot 9990 (Fugu, Shenmu) in the main production area of Fugu as an example, the unit price at year-end was 16,000 yuan/mt, compared to 20,250 yuan/mt at the beginning of the year, representing a magnesium price decline of up to 21%. Reviewing the price trend of magnesium alloy AZ91D, it can be seen that the average price of magnesium alloy AZ91D on December 31, 2024, was 17,800 yuan/mt, compared to 22,150 yuan/mt on December 29, 2023. The average price of magnesium alloy AZ91D fell by 4,350 yuan/mt in 2024, a decline of 19.64%.

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Since mid-March, magnesium prices have generally maintained an upward trend until mid-May, supported by a series of factors such as a reversal in the supply-demand pattern, a drop in magnesium ingot producers' inventory to low levels, the deployment of inspection work for bulk industrial solid waste storage sites in multiple regions, environmental protection inspections, and news of dolomite production halts. However, influenced by factors such as insufficient follow-up transactions, strong wait-and-see sentiment among downstream players, and increased demand for fund collection by suppliers at month-end, magnesium prices have recently weakened and declined.

According to SMM quotes, on May 28, SMM magnesium alloy AZ91D was quoted at 18,600-18,700 yuan/mt, with an average price of 18,650 yuan/mt, representing a pullback of 50 yuan/mt from the previous trading day. On the 28th, market transactions remained sluggish. SMM learned from a factory salesperson that downstream sentiment was currently strong in wait-and-see mode, with overall weak demand and low psychological price levels in the downstream. Due to magnesium plants maintaining a low operating rate, the inventory pressure on magnesium plants has been relatively small recently. Meanwhile, the overall weak trend in downstream demand has not improved further, resulting in a situation where "small inventory pressure" and "weak downstream demand" are in a state of mutual competition. If downstream demand continues to remain weak, it is expected that the support of low inventory levels in magnesium plants for magnesium prices may weaken.