Magnesium prices remain high and consolidate, with the market operating in the doldrums in the short term [SMM Magnesium Weekly Review]

1 Market Review

1 Dolomite

This week, the ex-factory price (excluding tax) of 1-3 grade dolomite (Wutai) was 78 yuan/mt, and the ex-factory price (excluding tax) of 2-4 grade dolomite (Wutai) was 128 yuan/mt, with prices remaining stable.

This week, dolomite prices remained stable. On the supply side, leading dolomite enterprises in Wutai, Shanxi, continued to suspend production, but the inventory stockpiled before the suspension was sufficient. Additionally, dolomite enterprises in Hubei, Inner Mongolia, and other regions of Shanxi actively produced and supplied dolomite, resulting in relatively sufficient dolomite supply. On the demand side, magnesium ingot producers resumed production and carried out maintenance shutdowns simultaneously. This week, primary magnesium production was 17,800 mt, down 1.6% WoW. Overall, magnesium ingot demand for dolomite remained stable. Overall, the supply-demand balance of dolomite was maintained, and it was expected that dolomite prices would remain stable.

1.2 Magnesium Ingot

1.2.1 Magnesium Ingot (Fugu, Shenmu - Main Production Areas)

This week, the mainstream quotations for 99.90% magnesium ingot in the main production areas ranged from 17,100 to 17,200 yuan/mt, with prices consolidating at a high level.

This week, magnesium prices consolidated at a high level. Due to the positive effects of the "anti-rat race" competition policy released last week, speculative demand was concentratedly released, and magnesium prices surged by 800 yuan/mt in a single week amid collective price hikes by upstream and downstream enterprises. Magnesium prices were trapped in a high-price dilemma, with limited room for change. Specifically, on Monday morning, traders entered the market in large numbers to clear low-priced inventory at 17,000 yuan/mt. Magnesium ingot producers then raised prices to 17,100-17,200 yuan/mt. After a small amount of transactions at 17,100 yuan/mt, magnesium ingot producers in the main production areas collectively quoted 17,200 yuan/mt, and even some leading magnesium ingot producers quoted 17,300 yuan/mt. At this point, magnesium ingot producers' quotations reached their peak. However, due to the low prices of previous orders taken by traders, market purchase willingness was not high, and magnesium prices remained at a high level. On Thursday, the reluctance to budge on prices of some magnesium ingot producers weakened, and the supply of magnesium at 17,100 yuan/mt increased. Subsequently, influenced by the mainstream transaction prices of magnesium ingot producers dropping to 17,100 yuan/mt on Friday, the center of magnesium prices slightly decreased.

1.2.2 Magnesium Ingot (Tianjin Port - FOB China)

This week, the FOB China price ranged from 2,340 to 2,440 US dollars/mt, with an average price of 2,390 US dollars/mt. Prices remained stable, with a slight decrease on Thursday and Friday due to the weakening quotations of magnesium ingot producers.

This week, overseas downstream orders were actively concluded, with a significant increase in the number of inquiries. The main procurement demand came from the Japanese and South Korean markets. The current mainstream transaction prices remained in the range of 2,340-2,360 US dollars/mt. Due to the strong desire of downstream customers to drive down prices and the accumulation of social inventory by traders in the early stage, the actual transaction prices were under pressure and decreased. It is worth noting that the South Korean market entered the traditional summer break period in August, and Europe is still in its summer break, which has led overseas orders to gradually adopt a wait-and-see attitude. Without the support of new demand, it is expected that FOB prices will struggle to sustain upward momentum in the short term.

1.3 Magnesium Powder

This week, magnesium powder prices remained high and stable. The mainstream tax-inclusive ex-factory prices for Chinese magnesium powder with a mesh size of 20-80 were 18,250-18,450 yuan/mt, and the Chinese FOB prices were $2,510-$2,580/mt.

The magnesium powder market maintained a weak and stable operation this week, with a clear tug-of-war between sellers and buyers. On the supply side, magnesium plants in the main production areas operated steadily, and the early-stage inventory of traders had not been fully digested, resulting in ample spot supply in the market. Some suppliers offered slight discounts to move goods. On the demand side, performance was sluggish, with downstream enterprises purchasing cautiously and only making just-in-time procurements. Coupled with the summer break overseas, which led to a decrease in export orders, the overall trading atmosphere was sluggish. Although the firm prices of raw materials provided some support to the cost of magnesium powder, in the absence of large-order demand, the market's bargaining center still shifted slightly downward.

1.4 Magnesium Alloy

This week, the mainstream tax-inclusive ex-factory prices for Chinese magnesium alloy were 18,700-18,800 yuan/mt, and the mainstream FOB prices for Chinese magnesium alloy were $2,580-$2,660/mt.

Recently, magnesium alloy prices have fluctuated in sync with the prices of raw material magnesium ingots. Affected by the high prices of raw material magnesium ingots, die-casting plants have strong fear of high prices, and the trading atmosphere in the magnesium alloy market is sluggish. Some magnesium alloy manufacturers have slightly increased their inventory. In addition, three national standards for magnesium alloys were recently released, and the attention of NEVs to magnesium alloy materials has increased. Coupled with the policy impact of the new national standard for EVs, which restricts the mass of plastic parts in the whole vehicle to no more than 5.5% of the total vehicle mass, in the long term, the current material substitution is driving a mild increase in domestic demand for magnesium alloys.

2 Weekly Summary

This week, the magnesium market overall showed a high and consolidating trend. The prices of 99.90% magnesium ingots in the main production areas fluctuated within the range of 17,100-17,200 yuan/mt. Supported by traders' replenishment at the beginning of the week, prices slightly increased, but then fell slightly due to insufficient demand follow-up. In overseas markets, FOB quotes remained stable, but transactions were weak. Supported by just-in-time procurements from Japan and South Korea, but constrained by the summer break in Europe, which suppressed demand, actual transaction prices were slightly under pressure. Magnesium powder and magnesium alloy prices followed the trend of raw material magnesium ingots, with sluggish market trading, downstream purchasing as needed, and a strong wait-and-see sentiment. Dolomite prices remained stable, with a supply-demand balance, providing firm support to the cost of magnesium ingots.

It is expected that the magnesium market will maintain a weak and stable operation next week. On the supply side, magnesium plants have limited inventory pressure, and there is still a reluctance to budge on prices. On the demand side, the fear of high prices among domestic downstream enterprises has not dissipated, and the overseas summer break has not yet ended, with the market lacking strong driving forces. In the short term, magnesium prices may continue to fluctuate rangebound, and attention should be paid to inventory changes at magnesium ingot producers and the pace of overseas demand recovery.