Transaction Follow-up: Magnesium prices fluctuated upward this week [SMM Weekly Magnesium Review]

1 Market Review

1 Dolomite

This week, the ex-factory price (tax not included) of 1-3 grade dolomite (Wutai) was 78 yuan/mt, and that of 2-4 grade dolomite (Wutai) was 128 yuan/mt, with prices remaining stable.

This week, dolomite prices remained stable. In terms of supply, although leading dolomite enterprises in Wutai, Shanxi, continued to suspend production, they had stocked up sufficient inventory before the suspension. Meanwhile, dolomite producers in Hubei, Inner Mongolia, and other regions of Shanxi were operating normally, actively ensuring market supply. Overall, the current dolomite supply was relatively sufficient. On the demand side, maintenance and production suspensions at primary magnesium smelters increased, with the weekly production of magnesium plants in the national sample reaching 16,448 mt, down 5.9% WoW. The theoretical demand for dolomite decreased accordingly. However, due to the increase in production resumptions at magnesium plants in late August, the demand for dolomite remained relatively stable. Currently, the dolomite market was in supply-demand balance, 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 17,300 to 17,400 yuan/mt, with prices consolidating at high levels.

This week, domestic magnesium prices in China first stabilized and then rose. At the beginning of the week, primary magnesium smelters were influenced by factors such as low inventory levels, leading to a strong reluctance to budge on prices. Magnesium prices remained firm at 17,100-17,200 yuan/mt. However, due to low order prices from end-users, traders had low purchase willingness, resulting in a stalemate in supply and demand and sluggish trading in the first half of the week. As the stalemate continued, some downstream customers made purchases at 17,100 yuan/mt. Due to tight spot supply, magnesium plants had strong reluctance to sell, with single trading volumes mostly ranging from 1 to 3 trucks and few large-volume transactions. Magnesium prices thus rose steadily. Subsequently, magnesium powder orders signed earlier were concentratedly released, pushing transaction prices up to 17,300-17,400 yuan/mt. As of the time of writing, the quotations of mainstream magnesium plants in Fugu had been raised to 17,400 yuan/mt, with most quotations of 17,300 yuan/mt in the market being short-term futures. Magnesium prices rose by a total of 250 yuan/mt this week.

1.2.2 Magnesium Ingot (Tianjin Port - FOB China)

This week, the FOB China price of magnesium ingot was reported at 2,380-2,440 US dollars/mt, with an average price of 2,410 US dollars/mt. The US dollar price of magnesium ingot remained stable this week, with a $20 increase in quotations in the second half of the week following the rise in ex-factory prices.

This week, trading in the overseas magnesium ingot market was sluggish, with few actual transactions from downstream customers and mostly inquiries. After the announcement of the FOB 2,320 US dollars/mt winning bid price in Japan at the beginning of the week, the mainstream quotations in the market remained in the range of 2,420-2,450 US dollars/mt, but actual trading volumes continued to be low. After the ex-factory price of magnesium ingots increased, downstream demand failed to keep up in a timely manner, and buyers generally adopted a wait-and-see attitude. Additionally, as the Japan and South Korea markets gradually entered the summer break period in August, terminal orders further decreased. For traders, this week was mainly spent fulfilling order deliveries signed in June, with most having completed stockpiling in advance. Only a few traders chose to procure spot cargo for delivery, but due to the price inversion, some transactions have already incurred losses.

1.3 Magnesium powder

This week, magnesium powder prices slightly increased. The mainstream tax-included ex-factory prices for Chinese magnesium powder with a mesh size of 20-80 were 18,500-18,700 yuan/mt; the Chinese FOB price was $2,530-$2,590/mt.

This week, magnesium alloy prices followed the upward trend of raw material magnesium ingot prices. On the supply side, due to fierce competition and severe "rat race" competition in the magnesium alloy market, processing fees have been consolidating at a low level for a long time. A leader from an alloy enterprise pointed out that the magnesium-aluminum price spread has been in an inverted state for a long time, especially for magnesium alloys with a high content of AZ91D aluminum, which have high costs. Currently, the magnesium alloy processing fees are close to the cost line, with strong bottom support. On the demand side, a leader from a die-casting factory stated that although order volumes have increased recently, considering the current high magnesium prices, market procurement is mainly based on just-in-time procurement. Overall, it is expected that magnesium alloy prices will maintain a firm upward trend in the future.

1.4 Magnesium alloy

This week, the mainstream tax-included ex-factory prices for Chinese magnesium alloy were 18,950-19,050 yuan/mt, and the mainstream FOB prices for Chinese magnesium alloy were $2,610-$2,670/mt.

Recently, magnesium alloy prices have fluctuated in sync with raw material magnesium ingot prices. Affected by the high prices of raw material magnesium ingots, die-casting factories have strong fear of high prices, and the magnesium alloy market has seen sluggish transactions, with some magnesium alloy manufacturers slightly increasing their inventory. Additionally, three national standards for magnesium alloys were recently released, and the attention of new energy vehicles on magnesium alloy materials has increased. Combined with the policy impact of the new national standard for EVs, which restricts the mass of plastic parts 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 magnesium alloy market demand.

2 Weekly Summary

This week, the domestic magnesium industry chain showed a fluctuating upward trend. Domestic magnesium prices stabilized first and then increased. Supported by low inventory levels at the beginning of the week, magnesium plants had strong reluctance to budge on prices, with prices remaining firm at 17,100-17,200 yuan/mt. Due to terminal price-driving efforts, transactions were mediocre in the first half of the week. Later, with a small amount of downstream transactions and the release of magnesium powder orders, magnesium prices climbed to 17,300-17,400 yuan/mt, with a cumulative increase of 250 yuan/mt this week. The overseas magnesium ingot market saw sluggish trading, with quotes at $2,420-$2,450/mt. Affected by the summer break in Japan and South Korea and price inversion, transactions were weak. The magnesium powder market saw increased trading activity as overseas buyers stockpiled ahead of the new tariff policy, but downstream acceptance of high-priced supplies remained limited. Magnesium alloy prices followed the upward trend of magnesium ingots, while processing fees remained at low levels for an extended period due to intense competition, approaching the cost line with strong bottom support. Demand side, just-in-time procurement dominated, and prices are expected to remain firm. This week, dolomite prices stabilized amid a supply-demand balance. Considering demand has steadied with magnesium plants resuming production, prices are expected to hold steady.

Next week, the magnesium market is projected to maintain a firm high-level trend. Supply side, magnesium plants face relatively small inventory pressure and retain strong reluctance to budge on prices. Demand side appears slightly sluggish, as domestic downstream reluctance toward high prices persists, while overseas markets have yet to form strong demand drivers as the summer break continues. Short term, magnesium prices are likely to continue fluctuating rangebound, with subsequent focus on inventory changes at magnesium plants and the recovery pace of overseas demand.