Upstream Remains Stable While Midstream Faces Pressure; Demand Inflection Point May Follow After Policy Window Period [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 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, leading dolomite suppliers in Wutai will gradually adopt tendering methods to sell dolomite externally. Considering the impact of the change in transaction mode, the upward momentum of dolomite prices may strengthen. On the demand side, the proportion of dolomite used by magnesium smelters in major production areas such as Hubei and Inner Mongolia provinces has increased. The change in transaction mode has limited impact on dolomite. Additionally, the production of primary magnesium smelters has shown an upward trend. The current estimated primary magnesium production for August is 80,000 mt, down 1.5% MoM, while the estimated production for September is expected to increase to 85,000 mt, up 5.7% MoM. Considering the subsequent upward trend in dolomite demand, the upward momentum of dolomite prices will strengthen.

1.2 Magnesium Ingot

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

This week, the mainstream quotations for 99.90% magnesium ingot in major production areas ranged from 17,250 to 17,350 yuan/mt, with magnesium prices under pressure.

This week, magnesium prices showed a trend of strengthening first and then weakening. At the beginning of the week, leading magnesium smelters successfully closed deals at the price of 17,500 yuan/mt, effectively boosting the confidence of magnesium smelters in major production areas. The mainstream quotations in the market remained firm at 17,400-17,500 yuan/mt. However, due to strong fear of high prices among downstream buyers and the market entering a phase of adjustment after the concentrated procurement of magnesium ingot for foreign trade and magnesium powder demand in the early stage, overall transactions were relatively scattered, making it difficult to form a concentrated purchasing force. The demand side of the magnesium market lacked support, and some magnesium smelters gradually lowered their quotations. As of Friday this week, the center of market quotations had dropped to 17,250-17,350 yuan/mt.

1.2.2 Magnesium Ingot (Tianjin Port - FOB China)

This week, the FOB China price was reported at 2,380-2,430 US dollars/mt, with an average price of 2,405 US dollars/mt. As the reluctance to budge on prices among factories weakened, traders' quotations also became slightly more flexible, showing a weakening price trend.

The trading atmosphere in overseas magnesium ingot markets remained sluggish this week, with only a small amount of transactions at the price of 2,400 US dollars/mt at the beginning of the week. As magnesium ingot prices in major production areas weakened, the mainstream quotation range for foreign traders was lowered to 2,380-2,390 US dollars/mt from Wednesday onwards, but actual transactions were limited, with only inquiries showing slight activity. Traders were panicked about the export declaration tax management policy to be implemented on October 1st, and their quotations became cautious. Currently, they mainly accept spot transactions and are taking a wait-and-see attitude towards orders delivered after October. Social inventory decreased slightly. Overseas downstream customers generally maintain a wait-and-see stance, believing that the current high prices lack demand support. Some customers plan to delay procurement until mid-September.

1.3 Magnesium Powder

This week, magnesium powder prices slightly decreased. The mainstream tax-included ex-factory prices for 20-80 mesh Chinese magnesium powder in the market ranged from 18,450 to 18,650 yuan/mt; the Chinese FOB prices ranged from $2,530 to $2,580/mt.

This week, the supply side of the magnesium powder market significantly increased, mainly due to the concentrated release of overseas orders in the previous week. To avoid the risk of stricter export tax inspections starting from October 1st, producers accelerated their production schedules for delivery. Currently, the procurement pace has slowed down. With the weakening momentum of raw material price support, downstream buyers' wait-and-see sentiment has intensified, and they generally expect prices to further retreat before entering the market to replenish stocks. The market presents a typical game pattern of "increased supply and waiting demand."

1.4 Magnesium Alloy

This week, the mainstream tax-included ex-factory prices for Chinese magnesium alloy in the market ranged from 18,900 to 19,000 yuan/mt, and the mainstream FOB prices for Chinese magnesium alloy ranged from $2,580 to $2,650/mt.

This week, magnesium alloy prices fluctuated in sync with magnesium ingot prices, maintaining high-level consolidation. On the supply side, some magnesium alloy producers conducted normal maintenance, keeping magnesium alloy production at a low level. However, considering the gradual progress of magnesium alloy engineering projects in the main production areas and the resumption of production after maintenance by magnesium alloy producers, magnesium alloy production is expected to increase in the future. On the demand side, magnesium alloy demand is sluggish in the short term, with downstream die-casting plants having a strong fear of high prices. Magnesium alloy market procurement is mainly based on just-in-time procurement, but new demand is gradually emerging. The dual regulations of the new national standard for EVs limiting weight and reducing plastic use, coupled with the continuous prominence of magnesium material cost-effectiveness, have led to a steady increase in new demand for magnesium alloy. Overall, the magnesium alloy market is in supply-demand balance in the short term, with magnesium alloy prices fluctuating in sync with magnesium ingot prices.

2 Weekly Summary

This week, the magnesium industry chain as a whole presented a generally stable with slight fall trend. The upstream dolomite price remained stable, but due to the implementation of the tender model and the expectation of a rebound in primary magnesium production, there is a possibility of an upward trend in the future. The magnesium ingot market first strengthened and then weakened, with quotes in the main production areas falling from 17,400-17,500 yuan/mt to 17,250-17,350 yuan/mt, and overseas FOB prices also decreasing to $2,380-$2,430/mt. Magnesium powder prices slightly decreased, with supply increasing due to the impact of the export policy window period. Magnesium alloy prices maintained high-level consolidation, with short-term supply-demand balance but gradually emerging new demand. Overall, the market presents characteristics of "stable upstream, weak midstream, and waiting downstream," with wait-and-see sentiment dominating market transactions.

It is expected that the magnesium market in September will show structural differentiation: dolomite may remain stable or increase slightly driven by the tender model; magnesium ingot may face short-term pressure but has expectations for a rebound during the peak season; magnesium powder demand is expected to rise after policy implementation; magnesium alloy is expected to perform well in the medium and long-term with support from emerging fields. We will focus on the production control in major producing areas and the realization of demand during the "September-October peak season". The market may experience a turning point after the policy window period.