Supply-demand pattern quietly changes, with abnormal changes in prices. Industry insiders call H1 a "speculative market"? [SMM Analysis]

Reviewing China's magnesium market in H1 2025, the long-term concentrated production halts at magnesium plants quietly reversed the supply-demand imbalance, with tight spot supply and low inventory laying a solid foundation for periodic price increases. Market sentiment was frequently disturbed by news such as "solid waste burial," "dolomite mine shutdowns in Wutai region," and "environmental protection checks deployment." Magnesium metal prices fluctuated frequently.

Price Review

In H1 2025, magnesium metal prices showed a pattern of initially low levels followed by highs, jumping initially and then pulling back, with bottom-range fluctuations.

Phase 1: Purchase Storage Provides Bottom Support, Prices Remain Stagnant

Supply side, due to weak demand, smelters in major production areas faced losses across the entire cycle system. Some announced formal production cuts, while winter conditions delayed production resumptions at previously halted facilities, maintaining a downward supply trend. Inventories at major producers reportedly fell to safe levels. Demand side, weak raw material prices kept downstream enterprises cautious, with strong wait-and-see sentiment.

Phase 2: Raw Material Price Declines vs. Low Inventory, Prices Follow a "√" Trajectory

Pressured by sustained raw material price declines and tight cash flow at plants, magnesium prices faced significant downward pressure. Smelters cut prices to stimulate downstream purchases, but this failed to alleviate cash flow issues, instead triggering a steep drop of nearly 1,000 yuan within half a month.
As prices fell to 15,000 yuan/mt, foreign traders entered the market en masse, rapidly depleting circulating inventory and driving prices upward. Despite occasional pullbacks, the tight balance and low inventory provided firm support, eventually pushing prices to 17,400 yuan/mt.

Phase 3: Resumption Rumors Gain Traction, Pessimism Triggers Price Pullback

As prices climbed to highs, buyers regained rationality. Coupled with small plants offloading stocks at low prices, the price center gradually shifted downward. Resumption rumors further weighed on sentiment, with anticipated supply additions likely to rebuild smelter inventory pressure, reopening the downward channel to 15,950 yuan/mt.

Production Review

Primary magnesium output totaled 465,000 mt from January to June, up 3.0% MoM, while magnesium metal production reached 414,000 mt, rising 2.6% MoM. Improved profitability from rising prices enabled previously halted smelters to gradually resume output by late April/early May, slowly increasing production.

Imminent Plant Restarts, Supply Growth to Drag Prices Lower?

SMM analysis suggests the current market faces low inventory, weak demand, and reduced costs. While tight inventory supports periodic rallies, explosive short-term demand could spike prices. However, resumption signals from multiple plants have strengthened downstream bearish sentiment, with weak fundamentals undermining price support. Overall, restarts may disrupt the tight supply-demand balance, keeping prices in the doldrums. Given heightened sensitivity to concentrated purchases, frequent fluctuations are expected, with prices likely to fluctuate downward.