Anti-"rat race" competition policies expected to take effect, ferrosilicon and coal prices rise strongly. Can magnesium prices continue to soar? [SMM Analysis]

Jul 25, 2025 18:18

Source:SMM

[SMM Analysis: Anti-"rat race" competition policies expected to take effect, ferrosilicon and coal prices rise strongly. Can magnesium prices continue to soar?] Under the interaction of supply-side support and demand-side pressure, the short-term fluctuations of magnesium prices will mainly revolve around high levels, and the market needs to find a new balance amid the tug-of-war between the two.

In July 2024, the Political Bureau Meeting of the CPC Central Committee first proposed the concept of "preventing vicious rat race competition," marking the official elevation of the "anti-rat race" issue to the national strategic level. In December of the same year, the Central Economic Work Conference upgraded it to "comprehensively addressing rat race competition," explicitly regulating the behavior of governments and enterprises. In July 2025, the Central Financial and Economic Affairs Commission Meeting further clarified that it was necessary to deepen the construction of a unified national market, regulate enterprises' price-cutting and disorderly competition phenomena in accordance with laws and regulations, guide enterprises to actively improve product quality, and promote the orderly exit of outdated capacity.

Against this backdrop, the commodity market continued to heat up this week, with prices of various non-ferrous metals rising in tandem. The ferrous metals sector also surged, driven by the soaring coking coal prices. Affected by the sharp jumps in the tender prices of core raw materials for primary magnesium such as coal and ferrosilicon, and coupled with the favorable conditions for a phased upward movement in the magnesium market's fundamentals, magnesium prices broke through the 17,000 yuan threshold on Thursday this week. Correspondingly, as magnesium prices jumped multiple times, traders' fear of high prices intensified, and the trading atmosphere gradually turned sluggish. Magnesium prices began to face downward pressure, with increased pressure for a pullback.

Subsequently, another turning point emerged. On Friday afternoon, the futures market for ferrosilicon hit the daily limit, with the most-traded ferrosilicon 2509 futures contract closing at 6166, up 404, representing a 7.01% increase. Regarding the ferrosilicon fundamentals, there was a tight spot supply of ferrosilicon, and inventory remained at a low level. Affected by the summer peak electricity usage, the upward adjustment of tender prices by steel mills, and strengthened cost support, ferrosilicon prices may usher in a phased rebound window. However, constrained by the dual pressures of gradually increasing supply and the off-season demand, the rebound height is limited. If ferrosilicon prices continue to rise subsequently, magnesium plants' willingness to maintain high prices may further strengthen, providing strong support for magnesium prices.

From the supply side, after a previous round of significant price increases, magnesium plant inventories have reached extremely low levels, and manufacturers' reluctance to sell has persisted. Looking at the demand side, there is currently a clear suppressive trend. Downstream enterprises' acceptance of current prices has significantly decreased, and there is a strong wait-and-see sentiment in the market, leading to a stagnation in spot transactions. The positive factors released by previous downstream concentrated procurement have partially materialized. If there is no substantial growth in subsequent demand, relying solely on existing low inventories and raw material support will limit the momentum for magnesium prices to continue rising.

Overall, under the interaction of supply-side support and demand-side suppression, short-term magnesium price fluctuations will mainly revolve around high levels. The market needs to find a new balance amid the tug-of-war between the two.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market exchanges, and relying on SMM's internal database model, for reference only and do not constitute decision-making recommendations.

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Anti-"rat race" competition policies expected to take effect, ferrosilicon and coal prices rise strongly. Can magnesium prices continue to soar? [SMM Analysis]

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