Tight spot supply of magnesium ingots, stronger-than-usual off-season overseas demand, and three consecutive rises in magnesium prices [SMM Comment]

SMM July 8 News:

The supply-demand pattern in the magnesium ingot market has undergone certain changes, driving consecutive price increases. Supply side, persistently tight spot supply of magnesium ingots coupled with rising production costs has strengthened producers' reluctance to sell, with low willingness to sell at lower prices and firm price support. Demand side defied traditional patterns as overseas markets did not enter the seasonal off-season during summer maintenance but instead showed a "stronger-than-usual off-season" characteristic in early July, with increased foreign trade procurement activity providing demand-side support. Under the combined effect of structural changes on both supply and demand sides, magnesium prices achieved three consecutive gains.

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Spot market:SMM quotations showed that on July 8, SMM magnesium ingot 9990 (Fugu, Shenmu) traded at 16,300-16,400 yuan/mt, averaging 16,350 yuan/mt, up 100 yuan/mt (0.62%) from the previous trading day. Compared with the July 3 average of 16,150 yuan/mt, the three-day gain totaled 200 yuan/mt (1.24%). However, as prices rose, downstream customers adopted a wait-and-see attitude toward current prices, with slower procurement mainly focused on just-in-time procurement.

Reviewing H1 magnesium price trends revealed "narrow gains but frequent fluctuations": The SMM magnesium ingot 9990 (Fugu, Shenmu) average rose merely 1.25% from 16,000 yuan/mt on December 31, 2024 to 16,200 yuan/mt on June 30, 2025. However, volatility was significant - the H1 peak occurred on May 13-14 at 17,450 yuan/mt, while the trough on March 6-7 hit 15,050 yuan/mt, creating a 2,400 yuan/mt spread. This pattern stemmed from supply-demand shifts and news-driven sentiment: prolonged concentrated production halts gradually reversed the "strong supply-weak demand" dynamic, with tight spot supply and low inventory supporting periodic rallies; meanwhile, market sentiment fluctuated amid news about "solid waste burial," "dolomite mine suspensions in Wutai," and "environmental protection checks." Overall, H1 prices showed "lower early, higher later, jump initially and then pull back, bottom oscillation" characteristics.

Outlook

Magnesium's future trajectory requires multidimensional analysis of supply-demand patterns, market dynamics, and potential variables:

Supply side, the current tight spot supply situation is unlikely to improve substantially in the short term. Some magnesium producers remain under maintenance or production restrictions, with slow progress in full production resumptions and new capacity releases lagging behind market demand. Meanwhile, persistent high procurement costs for raw materials have further narrowed magnesium producers' room for price adjustments, making it difficult to swiftly ease tight supply conditions and providing fundamental support for magnesium prices. On the demand side, overseas markets continue to exhibit "stronger-than-usual off-season" characteristics, maintaining active foreign trade procurement demand with restocking orders effectively boosting prices. Market participants should monitor when just-in-time procurement demands from downstream sectors like die-casting and automotive parts will emerge as China's domestic manufacturing sector gradually enters the pre-heating stage of traditional peak consumption seasons, potentially underpinning magnesium prices.

Under current supply-demand dynamics, magnesium producers show strong reluctance to budge on prices, with limited scope for low-price sales. Considering the ongoing tug-of-war between market supply and demand alongside magnesium enterprises' low inventory levels, magnesium ingot prices will likely trend steadily upward in the short term, with price elasticity potentially strengthening if demand continues to recover.

However, two key variables warrant close attention: first, whether planned production resumptions by multiple magnesium producers in July could disrupt the current tight supply situation and suppress prices if capacity is concentrated; second, whether the exceptional overseas "stronger-than-usual off-season" restocking orders observed in early July can sustain, as their continuity will directly impact magnesium price upside potential.Z13/>Overall, magnesium prices may maintain a strong upward bias in the near term, but caution is advised regarding potential risks from supply-side capacity releases and demand-side order fluctuations.Z14/>Recommended Readings:

》H1 Magnesium Market Review: Subtle Supply-Demand Shifts and Price Volatility – Industry Insiders Label First Half as "Speculative Market"? [SMM Analysis]

》May Export Pattern Changes: Magnesium Alloy Share Rises as Magnesium Ingot Exports Plummet [SMM Analysis]