Tug-of-war Between Sellers and Buyers Dominated the Market This Week, Magnesium Industry Chain Was Weak First Then Strong [SMM Magnesium Weekly Review]

1 Market Review

1 Dolomite

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

Dolomite prices remained stable this week. Supply side, major dolomite producers in the Wutai area are still in a production halt phase, with market transactions mainly involving the delivery of existing inventory. Producers in Hubei region are operating normally, ensuring a steady supply of dolomite. Demand side, magnesium plants that had suspended operations due to high temperatures are gradually resuming production. Additionally, magnesium plants planning to resume production due to improved profit margins will also start production soon, leading to an expected increase in magnesium ingot supply. The demand for dolomite is on the rise, and supported by this demand, dolomite prices are expected to remain firm.

1.2 Magnesium Ingot

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

This week, the mainstream quotations for 99.90% magnesium ingot in the main production area were 17,250-17,350 yuan/mt, with magnesium prices showing a weak-to-strong trend.

Magnesium prices showed a weak-to-strong trend this week. At the beginning of the week, magnesium plant quotations were slightly firm only on Monday. Subsequently, under the influence of downstream bargain down purchasing prices, the market transaction prices declined. By Wednesday, the mainstream transaction prices for magnesium were 17,100-17,200 yuan/mt. Some traders entered the market to purchase, and the association called on magnesium plants to maintain prices, increasing the reluctance to budge on prices among magnesium plants. This marked the temporary end of the downward cycle for magnesium prices. Traders began to enter the market to place orders, and magnesium prices bottomed out and rebounded. Overall, the magnesium market is still in a tug-of-war between sellers and buyers. On the supply side, smelters are gradually resuming full production, and there is still a surplus in recent inventories, leading to increased inventory pressure. On the demand side, foreign trade deliveries at month-end may provide some support for magnesium prices, making it difficult for prices to fluctuate significantly next week.

1.2.2 Magnesium Ingot (Tianjin Port - China FOB)

This week, the China FOB price was reported at $2,380-2,430/mt, with an average of $2,405/mt. Prices continued to weaken at the beginning of the week but rose slightly mid-week as factories became more reluctant to budge on prices.

This week, overseas tenders and inquiries for magnesium ingots were active, but actual transaction volumes were limited. FOB quotations showed a clear divergence: spot and shipments before mid-September were concentrated at $2,370-2,390/mt, while October and later deliveries, due to cautious observation by traders, saw quotations generally raised to $2,450-2,500/mt. According to the SMM survey, downstream acceptance of higher prices is generally low, and specific transaction details will become clearer in early September. The market is currently in a tug-of-war between sellers and buyers. Export prices are affected by unclear policy expectations for October, while domestic magnesium producers' reluctance to budge on prices provides strong support. If ex-factory prices continue to rise, FOB quotes may also increase.

1.3 Magnesium Powder

This week, magnesium powder prices decreased slightly, with the mainstream tax-inclusive ex-factory price for 20-80 mesh Chinese magnesium powder at 18,450-18,650 yuan/mt; the Chinese FOB price was $2,530-2,580/mt.

The purchasing pace in the magnesium powder market slowed this week, with companies mostly adopting a purchase as needed strategy to cope with raw material price fluctuations. On the production side, output steadily increased this month. From export data, July exports significantly rose, and some of the August order demand has been released in advance.

1.4 Magnesium Alloy

This week, the mainstream tax-inclusive ex-factory price for Chinese magnesium alloy was 18,900-19,000 yuan/mt, and the mainstream FOB price for Chinese magnesium alloy was $2,580-2,650/mt.

This week, magnesium alloy prices fluctuated in tandem with magnesium ingot prices, maintaining a high-level consolidation. On the demand side, recent new national standards for EVs have driven EV manufacturers to choose lightweight materials such as magnesium alloys, leading to a surge in EV demand. AM60 magnesium alloy, which is widely used in EVs, saw an increase in demand. According to a magnesium alloy factory manager, magnesium alloy demand in August increased slightly YoY. On the supply side, major magnesium alloy producers operated normally. Overall, driven by demand, magnesium alloy inventory is lower than in previous years, and it is expected that magnesium alloy prices will fluctuate rangebound at high levels, following magnesium ingot prices.

2 Weekly Summary

This week, the magnesium industry chain showed a weak-to-strong operational trend. Upstream dolomite prices remained stable, with steady dolomite supply this week. As magnesium plants gradually resume production, demand is expected to grow, keeping prices firm. In the main producing areas, magnesium ingot prices were initially weak but then strengthened. Currently, there is a tug-of-war between supply and demand, making it difficult to predict next week's price changes. Tianjin Port FOB prices rose slightly mid-week, supported by policy expectations and domestic price resistance, and may adjust with ex-factory prices. Magnesium powder prices decreased slightly, with slower purchases but improved production and exports. Magnesium alloy prices followed magnesium ingot prices at high levels, with EV demand driving growth and low inventory, leading to a narrow rangebound fluctuation at high levels.

3 Brief Comments on Production and Inventory

3.1 Weekly Production

From August 16 to August 21, the weekly production of the national sample magnesium plants was 17,416 mt, with a weekly operating rate of 57%, up 3.3% WoW.

3.1 Weekly Inventory

1. This week, production site inventory increased by 6.5% WoW. In the first half of the week, downstream buyers, influenced by the "rush to buy amid continuous price rise and hold back amid price downturn" sentiment, made few transactions, causing slow inventory growth. Although subsequent price stabilization news stimulated some downstream purchases, overall, production site inventory showed an upward trend.

2, This week, social inventory decreased slightly by 0.96%, mainly due to the recent concentrated deliveries by traders, and the inventory at Tianjin Port increased significantly.