How can Chinese magnesium market navigate intertwined bullish and bearish factors going forward [SMM analysis]

As August approaches its halfway point, the magnesium market has seen magnesium prices consolidating at high levels. Half of the market traders have temporarily adjusted their market operation rhythms, leaving the magnesium market "silent." Amidst this calm market atmosphere, there are undercurrents in the magnesium ingot market. Can the magnesium market maintain its current situation and continue to surge ahead in August?

The production resumption plans of primary magnesium smelters are steadily advancing. How will the supply side evolve?

In August, magnesium ingot smelters in the main production areas are still undergoing normal maintenance. Currently, six smelting enterprises are undergoing maintenance in August, with two of them having relatively large capacities. Additionally, two primary magnesium smelters that underwent maintenance in late July will resume production in August. Two magnesium plants that resumed production in July will operate normally in August. However, considering the continuous impact of high temperatures on the efficiency of primary magnesium smelting, the increase in primary magnesium production from the recovery of previous maintenance will be less than the decrease in production. It is estimated that primary magnesium production in August will be 80,000 mt, down 1.5% MoM, and magnesium ingot production will be 71,000 mt, down 1.7% MoM. In the early part of September, magnesium plants that underwent maintenance will gradually resume production, with one magnesium plant's resumption increasing magnesium ingot supply. Additionally, considering that one magnesium plant may undergo maintenance in September according to past practices, this will, to a certain extent, reduce magnesium ingot supply. Overall, it is estimated that primary magnesium production in September will be 85,000 mt, up 5.7% MoM, and magnesium ingot production will be 76,000 mt, up 6.5% MoM.

The impact of major commemorative activities driven by political factors on the price trend of magnesium ingots

From historical data, during major events such as National Day celebrations, international conferences, and military parades, steel enterprises in the Beijing-Tianjin-Hebei region and surrounding areas usually implement temporary emission reduction measures to ensure air quality. On the supply side, the National Energy Administration issued a notice on coal mine inspections on July 22, explicitly requiring strict control of overproduction. Non-compliant coal mines must suspend production for rectification, and special inspections of coal mine production will be initiated in eight provinces (regions), including Shanxi and Shaanxi. All regions are required to complete inspections and submit reports by August 15. On the demand side, production restrictions in the Beijing-Tianjin-Hebei region may lead to a decline in industrial coal demand. Combining market conditions during previous major military parades, prices consistently fell throughout the period, with the core reason being that the demand suppression effect exceeded the impact of supply contraction. Overall, the current raw coal price is facing downward pressure. As coal is an important raw material for magnesium ingot smelting, cost support may weaken.

The overseas summer break is entering its countdown, awaiting the return of foreign trade demand

In the first half of August, the overseas magnesium ingot market saw sluggish trading. Domestic leading magnesium powder manufacturers entered the market to stockpile, and magnesium-aluminum alloy demand remained stable, providing bottom support. Overall demand slightly weakened. In the mid-to-late August and early September, the implementation of the new national standard for magnesium alloys stimulated the release of new alloy demand. Restocking of aluminum alloys for rigid demand provided bottom support, and foreign trade demand, seeking stability, may be released in a concentrated manner, providing strong support for magnesium ingot demand. Overall, both supply and demand in the subsequent market are expected to increase slightly. Considering that the current inventory of magnesium ingot producers is at a low level and it still takes time for magnesium ingot producers to resume production, it is expected that the magnesium ingot market will be more likely to rise than fall in late August.